AHLA's Speaking of Health Law

2021's Biggest Antitrust Developments and What to Expect in 2022

January 18, 2022 AHLA Podcasts
AHLA's Speaking of Health Law
2021's Biggest Antitrust Developments and What to Expect in 2022
Show Notes Transcript

In the fourth installment of their popular annual series, John D. Carroll, Partner, Sheppard Mullin Richter & Hampton LLP and Alexis J. Gilman, Partner, Crowell and Moring LLP, are joined by Jeny Maier, Partner, Axinn Veltrop & Harkrider LLP, to discuss 2021's biggest antitrust developments and what attorneys should expect in 2022. Sponsored by Axinn.

To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.

Speaker 1:

Support for a H a comes from axon, which brings unmatched depth in the skills needed to address healthcare, collaboration, and competition. They are one of the best known antitrust firms in the world. With more than 60 full-time competition lawyers, they represent companies across the healthcare universe and help clients avoid antitrust landmines, complete mission, critical deals and protect their interests and litigation and investigations from, from a visit.com.

Speaker 2:

Well, thanks everyone. And welcome to the a H L a antitrust yearend review podcast. My name is Jenny Mayer. I'm a partner in Washington, DC at axon Bero and heart rider. And I am very pleased on behalf of ax to be sponsoring this podcast and, uh, to have with me today, uh, two of our esteemed, uh, members of the bar, uh, Alexis Gillman and John Carol, who, uh, frequent listeners and readers of a L a will recall as being, uh, our annual antitrust year review, uh, hosts. And we are bringing you the top 10 developments from 2021 in the world of antitrust in healthcare and the top 10 things to watch, uh, in 2022, as I say this, it's always hard to, uh, look at these numbers and recognize that we are in 2022 almost. I, uh, so we will, uh, kick things off by first having our esteemed, uh, colleagues, uh, introduce themselves, Alexis, go ahead.

Speaker 3:

Thanks, Jenny. And, uh, great to have you on the podcast this year. Um, I'm Alexis Gilman. I'm a partner in the antitrust in competition group at cool and more in Washington, DC.

Speaker 4:

Uh, I'm John Carol. I'm a partner, uh, at shepherd Mullen in the DC office in the antitrust group.

Speaker 2:

And does, uh, all of us here, uh, participate in, uh, the antitrust world in healthcare. We, uh, are going to be expressing some, uh, views and thoughts, uh, on this podcast, but wanted to make sure the, uh, we appropriately gave the disclaimer that, uh, the views that we express here are, are our own and, uh, are not those of any of our clients or our firm's clients. So with this moderator job, I get to do my very best impression of a game show host and what we will be doing here in the next, uh, few minutes is going through what we've, uh, come up with as the top developments of 2021 and healthcare antitrust. So we will start off with number 10, the FTCs section six B study of healthcare provider consolidation. And I will turn that over to John.

Speaker 4:

Thanks, Jenny. Yeah, happy to be weighing in at number 10. And I will note just very briefly that every year it's a challenge to pick 10 things or to limit it, uh, our discussion to 10 things that have occurred and to predict 10 things that, that we think will be occurring. And that we're excited about in the healthcare antitrust arena and this year was certainly no different. There were, there's a lot to talk about. There's been a lot of action in this space, as I'm sure our listeners are well aware. And so number 10 though, it's we, we, we listed it last it's, it's hardly leased, and that is, uh, something that occurred earlier this year in, in January area where the FTC announced that they had issue orders to, uh, certain health insurance companies to provide information, uh, to the commission, uh, to allow way to study the effects of physician group and healthcare facility consolidation that has allegedly occurred, uh, from 2015, uh, through the end of 2020, this, um, uh, issuance of these orders is part of a broader initiative from the FTCs bureau of economics, uh, to, uh, help their economists at the agencies, uh, carry out more retrospective studies to, to test their analytical tools and quote, strengthen their enforcement efforts. And so as part of this, they issued, uh, they being the FTC issued these subpoenas to certain, uh, insurers seeking certain types of data, such as commercial claims data for inpatient outpatient and physician services. Again for the years, 2015 to 20, uh, 20. And the purpose of all of this, according to the FTC, um, is to understand and assess the impact of physician consolidation, including physician practice, mergers, um, and hospital acquisitions of physician practices. The FTC issued, um, some additional clarification, uh, specifically Mike Vita, the deputy director of research and management over at the bureau of economics, uh, issued some additional guidance. And, and with respect to the issuance of, of these orders, uh, a few months later in eight April. And I think the reason why, um, you know, oh, I'm sorry, backing up, uh, issued this guidance in April, uh, to help folks understand that the FTC considers the healthcare industry of paramount importance when it comes to antitrust enforcement and that clarification, um, or guidance that was issued by might be point it out right off the bat, that healthcare spending accounts for a significant share of us GDP. And of course the FTC is there for focused on it and in particular on us physician markets. And so I think the takeaway here, isn't just that the FTC is studying something and the healthcare antitrust arena, but as Alexis and, and Jenny, as you well know, um, some times these six B studies, these analytical studies, these industry studies that the FTC, uh, pursues often predict, uh, future enforcement efforts. And so we saw the hospital retrospective, uh, study in the early two thousands that then arguably precipitated a, a wave of unprecedented hospital merger enforcement. And it may be a stretch to say, that's coming with respect to physician groups in particular, but at the same time, it's something, um, given the past. Uh, and, and, and what, uh, these studies have, uh, uh, influenced or resulted in with respect to enforcement actually. And it's something that we're certainly keeping our eye on and that we consider to be a, a pretty significant development in healthcare antitrust in 2021.

Speaker 2:

Thanks John. Yes, definitely something to keep our eye on in particular, it's very consistent with a lot of the, uh, rhetoric coming out of the agency around, uh, non HSR reportable transactions, uh, of which, you know, physician transactions, uh, often are given, uh, the size of those deals. So it's, uh, very much something that is, uh, on the minds of, of the agency and probably will be, uh, going forward. So taking a step out of the FTC world, uh, for a few moments and going over to, uh, state side of things in a turn to Alexis with, uh, development, number nine, our Sutter settlement in California.

Speaker 3:

Yeah. So I'm calling this one, uh, Sutter settlement is settled, uh, because I thought we should introduce a little alliteration to this year's part to really spice things up. Um, so this number nine is that in August a superior court judge in California gave final approval to a 575 million settlement, uh, between Sutter the California attorney general and private plaintiffs to resolve longstanding antitrust allegations about out Sutter's contracts with health plans, uh, the state and private plaintiffs had alleged that Sutter's contracts with health plans contained so-called all or nothing terms that basically required health plans to include all Sutter providers in their networks or none which allegedly eliminated insurer's ability to choose which providers they could include in networks. Uh, the plaintiffs also alleged that the contracts prevented insurers from steering patients to lower cost providers and required Sutter to be included in the best tier of any tiered insurers networks. And that Sutter prevented insurers from disclosing the, uh, price of their services to the insureds members until after services were provided and build out. In addition to the 750, uh, 700, 570 5 million payment, the settlement also requires Sutter to end this all or nothing, contracting practice and steering contract terms and allow price transparency, uh, by providers to their, by insurers, to their members. So that's our number nine for the year.

Speaker 2:

Thanks Alexis. And we are, uh, moving up the list and headed back, uh, to the FTC and like to have John give us, uh, the rundown of the FTCs repeal of the vertical merger guidelines.

Speaker 4:

Yes. And for now, thanks, Jenny. It is just the FTC, uh, which took unilateral, uh, action without the department of justice antitrust division back on September 15th of this year. Um, and withdrawing the vertical merger guidelines actually had not been in place all that long, uh, having been released in the year of 2020. Um, this is an action that we could probably talk about the rest of the podcast, but I'll spare us that discussion, uh, and just provide a short summary, which is the reason why we are covering it in the context of, um, the healthcare anti trust arena is because vertical mergers are something that are relatively common in the industry. So by vertical mergers, we mean a transaction involving a combination of, you know, two businesses or, or ho, or, or entities at different levels of the supply chain. And so, uh, common example and healthcare antitrust would be a, a transaction or merger acquisition of a, uh, involving a payer and a provider. So, um, you know, in that instance, the provider is essentially the seller or the provider, the service, and the insurance company, the payer, um, is the purchaser of that service. And so transactions that are vertical. In other words, those that don't involve head-to-head or so-called horizontal competi, um, have been subject to, I think it's fair to say an ambiguous, uh, legal standard, um, in modern antitrust. And so in order to help, uh, practitioners, uh, and those in the industry better understand the analytical framework for assessing these types of transactions. The federal trade commission and department of justice is shoot some guidance, not, not particularly clear guidance, to be honest, but, um, guidance, um, as to how they view those transactions with respect to in particular, the type of transactions that don't present, competitive harm, the FTC, uh, and that September 15th of, uh, of this year, just not that long ago under, uh, new chairperson, Conley leadership, uh, withdrew those so that they can better understand, um, uh, what the FTC and, and, and, and they've committed to working with DOJ on this, but to understand, um, clear, uh, and provide, explore clear, sorry, explore and provide clear and administrative guidance on the characteristic characterizations of transactions that are likely unlawful to, in order to quote, provide market participants with clear notice, reduce burden on antitrust, enforcers, and aid judges, by allowing them to focus on observable facts that tend to predict anti-competitive effects rather than complex and speculative claims. So that's a mouthful of a quote from the Ft. See, but essentially what I think we can take away from this is that, um, the types of transactions that are vertical transactions that are being analyzed by the FTC in light of having no guidelines, um, are subject to debate and require very careful analysis from practitioners in assessing likely competitive harms. I would also point out that two commissioners at the time dissented, uh, from this, um, there was a three to two vote. So, uh, Wilson with commissioners Wilson and Phillips dissenting. And that, as you can imagine, we will probably cover soon. We, with respect to 2022, uh, those of us who practice in this area are eagerly anticipating what the FTC and perhaps the DOJ will do with respect to guidance on vertical transactions in the future.

Speaker 2:

Thanks, John, that's a great summary. And I think as you alluded to at the end, there's gonna be several things, uh, that we're gonna talk about here in current developments from 2021 and, and things to watch for, for 2022, as it relates to, uh, the leadership of the FTC and how that might, uh, impact, uh, both conduct and, and merger review going forward. So please stay tuned. So transitioning, uh, out of the merge our world, uh, to some private litigation, uh, turn it over to Alexis to talk about our number seven development, the McLaren St. Luke's versus ProMedica case.

Speaker 3:

Yeah, I call this one, no deal and refusal to deal claims and, uh, ties in a little bit to the vertical integration point. John was making, um, a as it relates to, um, an integrated provider in ProMedica, and there's a long backstory here, but the, the quick and dirty version is that ProMedica, which is based in Toledo, Ohio acquired, uh, a nearby community hospital St. Luke's hospital in 2010 and St. Luke's was at to ProMedica's own health plan, which is called paramount, uh, the FTC soon after challenged the acquisition in case that goes back to the time I was there. And, and maybe even you were still there, John, um, or soon or soon after you left, but, um, ultimately that case ended up at the sixth circuit that ordered that acquisition beyond. Wow. Um, it's part of that dives process. Uh, ProMedica's gonna sell St Luke's to one particular acquire St. Luke's convinced ProMedica not to sell it, it to that particular buyer, but in exchange St Luke's apparently agreed that ProMedica could drop St Luke's from the paramount health insurance network when St Luke's was ultimately divested, uh, eventually St Luke's was divested to McLaren and well, you can kind of guess what happened next Pereda gave St Luke's notice that it was terminating St. Luke's from Paramount's commercial and Medicare advantage plans, uh, St. Luke's upon receiving that notice filed for preliminary injunction, prevent ProMedica from terminating it from the paramount network and alleged that the termination violated the NHS laws as a restraining trade, and was an attempt ProMedica to maintain a monopoly over hospital services in the local, uh, healthcare market. The district court actually ruled in favor of St. Luke's entering the PI saying that ProMedica's 50% market share suffice to show that pro uh, ProMedica had market power and found that there was little doubt that ProMedica's planned termination of St Luke's was an any competitive refusal to deal. Um, case was appealed to the sixth circuit, which reversed, uh, sixth circuit said that refusals to deal claims, quote, face a steep, an obstacle leading climb, and that refusals to deal claims are on the outer bounds of antitrust laws of other courts. As other courts have said before, uh, the circuit also said that Pereda had a legitimate basis for terminating St Luke's and that St Luke's could not satisfy the PI standard to show irreparable harm since monetary damages were available. So, uh, another court case re rearing the high hurdle that plaintiffs face in making refusals to deal claims,

Speaker 2:

Thanks, Alexis. And as we continue to, uh, March through our list, we wanna move on to development. Number six, the various DOJ, uh, criminal, uh, no poach and wage fixing actions, which have been, uh, unfortunately, uh, sort of more focused on the healthcare industry than other industries, and wanted to turn this over to John for his views.

Speaker 4:

Thanks. So, yeah, we've been talking a lot about the FTC so far and our, our top 10 of 2021, and in certainly some litigation and now things are getting more serious and we're about folks, uh, going to jail, uh, for concerted behavior or agreements, um, in the antitrust arena. Uh, so starting, uh, earlier this year, uh, this goes back before 2021, but just in the scope of 2020, uh, in the scope of this year of 2021, there have been a number of indictments, um, issue by the department of justice for, uh, agreements on, uh, not to poach each other's employees and to quote and, and to, uh, uh, engage in, in what's called wage fixing. So couple prominent ones. Um, the first one was on January 7th, and that was where the DOJ announced, um, its indictment of surgical care affiliate and another entity that own, um, and operates some outpatient medical care centers across the country. Um, they, uh, were alleged to have violated, uh, section one of the Sherman act by agreeing not to solicit each other's senior level employees. That was actually the first ever criminal, no poach case, which was, uh, a few years after the DOJ and FTC released antitrust guidance for HR professionals, where, um, they warned that the DOJ intends to proceed criminally against wage fixing and no poach agreements. Um, so this actually relates back to, I think what we were saying, Jenny and Alexis, number 10, which is when the agencies issue guidance or issue studies sometimes, um, those can really predict, uh, future enforcement efforts. And this was certainly no exception. Um, another one to point out was a, a bit more recent in April of this year where a federal grand jury in the Eastern district of Texas, uh, return an indictment that charged two Texas, uh, men with conspiring to, to fix prices, uh, by lowering rates paid to certain healthcare workers. And then they also allegedly conspired an endeavor to obstruct an FTC investigation, um, into that conduct. And so this involved, um, some action back in 2017, but again, precipitated an indictment in 2021 where the two defendants allegedly, uh, uh, violated the law criminally, um, by agreeing to pay lower rates for certain physical therapists, um, in, in north Texas and including in the Dallas Fort worth metropolitan area. So this is some thing where, um, as you said, unfortunately, it's in the healthcare antitrust arena. There have been other actions as well. Uh, certainly when we're talking about, um, agreements not to poach or to agree on, on, on wages paid to employees, um, you know, we, we, I think as practitioners always understood these to be problematic, but it's particularly noteworthy that we're talking about criminal indictments now in this space.

Speaker 2:

Thanks, John. And while we don't really necessarily have this as a separate thing to watch for 2022, uh, I think John and Alexis, uh, likely agree with me that this is a extremely hot area in which, uh, DOJ has put a lot of resources, uh, over the course of the last few years. And it seems to, uh, only be gaining more and more momentum, uh, as the years go on. Uh, certainly also something to keep in mind as parties, uh, look at M and a activity. Uh, sometimes these things do come to light in the course of a merger investigation or other agency investigations. So always important for companies to ensure that they have their houses in order before they, uh, engage with the agencies, uh, on other matters, potentially related. So we are rounding, uh, a corner and getting into our top five developments and headed back to the FTC and have Alexis give us an overview of the case against Illumina and grail. Yeah, the

Speaker 3:

FTC goes vertical by which, I mean, we're coming back to, uh, mergers and vertical mergers in particular, excuse me. So in, in this past spring, the FTC Sue two blah Illumina's acquisition of grail, again, this is a vertical merger and it involves a, uh, supplier of next generation DNA sequencing technology, uh, and products that's Illumina with a downstream customer licensor of that technology, um, that was developing what's called a multi cancer early detection test, or M C E D test and that's grail. So the FTCs basic allegation is that Illumina is a dominant and essential provider of this input. This DNA sequencing technology that's needed to conduct these cancer tests. Um, and that after the merger, Illumina could either stop supplying its sequencing technology to GRAIL's competitors, or it could raise the price of that sequencing technology to GRAIL's competitors in either case making those competitors, uh, much less effective, uh, in their ability to compete against grail. Uh, I'd say that the case is big news for lots of reasons. I think two of the most, um, interesting ones are first that it, the case does represent the first time the FTC has actually litigated a vertical merger and by my count in the last half century or so, and secondly, um, this is what we call a, a litigate, the fixed case, um, in particular Illumina had offered to, to settle this case with the FTC, by extending a number of commitments to GRAIL's rival developers of cancer tests. Um, and in particular, the offer a 12 year supply commitment for this, uh, DNA sequencing technology with guaranteed access to the products, as long as customers were still purchasing those products, uh, no price increases during the term of that commitment and no discontinuation of any Illumina products over the term of that agreement. So, uh, you know, I think those are pretty significant commit immense, but did not satisfy the FTC. Um, there was some procedural intrigue that we don't really have time to cover in any detail, but the short version is that Illumina closed the acquisition in grail while the FTC suit and an European commission investigation, uh, were still pending. So the FTC was left to litigate this case as a con also made in merger in its administrative court, um, that administrative trial wrapped up in September, and now we're waiting for the AJ's decision, which is still pending. So one to watch and we'll come back to, uh, I think in the second half of our, our podcast.

Speaker 2:

Thanks Alexis. Yes. That one is definitely something that raises a whole, uh, spate of different antitrust, procedural and substantive issues, and is, is a really interesting one. So I will actually give John and Alexis a chance to take a breath and, uh, cover our topic. Number four, uh, development from 2021, uh, is actually a little bit of a holdover from 2020. Uh, and you may recall this from last year, this is the DOJs case against Geisinger and evangelical. So as you may remember from previous podcasts or other a L a programming, uh, the DOJ, uh, brought a challenge to a partial acquisition arrangement in between Geisinger and evangelical in Pennsylvania. Uh, the parties had entered into what they called a collaboration agreement in February, 2019. And in that agreement, Geisinger agreed to acquire a 30% interest in evangelical, uh, in exchange for a hundred million towards some IP licensing and other investment projects. Uh, the agreement, uh, according to the DOJs complaint also provided a number of different rights to Geisinger in exchange for their, um, contributions in the collaboration. And it gave them certain approval rights over evangelical, strategic decision making, and the DOJ, uh, an open investigation shortly after this arrangement was executed. The hospitals agreed to a hold separate to maintain the status quo and the DOJ their complaint, uh, in August, 2020 to block the deal, uh, alleging that, uh, the parties had a history of close competition with one another, uh, that they cooperated with each other in an anticompetitive manner. And that the partial acquisition agreement would've violated section seven of the Clayton act, as well as section one of the Sherman act. So the current development, uh, from this year is that in March on March 3rd, the antitrust division announced a settlement with Geisinger and evangelical resolving the DOJs challenge to the partial acquisition. That settlement was approved by the district court September. And in effect, it will prevent Geisinger from controlling or influencing evangelicals, ordinary course of business, uh, operations and trying its best to restore competition between the parties. And just to outline sort of the scope of the settlement. Uh, number one, it cap is Ander's ownership interest in evangelical at 7.5%, as opposed to the 30% that they had originally, uh, sought to acquire the settlement also, uh, restricts, uh, entanglements between the parties. Uh, they had entered into a number of different arrangements that would have given, uh, Geisinger some, you know, authority to approve, uh, or enact certain, uh, sets of behavior, uh, on the evangelical side. In addition, the settlement prohibits almost all information exchange between the parties in order to ensure that, uh, competitively sensitive information is not shared between the two competitors. Next, it also sets some rules of engagement for future cooperation between the parties. I think this is recognizing, uh, on the part of DOJ that there are some benefits to the parties, uh, working together to benefit the community. And finally, the settlement requires the parties to engage in antitrust compliance programs and maintain firewalls. So by limiting these types of financial entanglements between the parties going and imposing additional restrictions on their interactions with one another, uh, the settlement believe, or the DOJ believes that the settlement will sufficiently incentivize the parties to continue to compete against each other aggressively going forward. And so beyond just the DOJs action, challenging the, uh, partial acquisition agreement, Geisinger and evangelical are also continuing to defend themselves against some civil lawsuits that have been brought by healthcare professionals, alleging that the parties had agreed with one another, not to poach each other's employees, uh, driving down wages and, and compensation this yeah, as, as John was suggesting before, no poaches are incredibly hot, um, right now in the antitrust world. Uh, so this punitive class action was filed in February of this year. And it was likely inspired by some disclosures that were in the DOJs complaint, which referenced a no poach arrangement between the parties for nurses. So Geisinger and evangelical move to dismiss the case, which is pending in Pennsylvania federal court. Uh, but very recently the judge denied the party's motion to dismiss the federal antitrust claims, finding that the plaintiff's allegations about the note coach agreement were sufficient to allow the case to continue towards discovery said that part is certainly something to watch for in 2022. We're now headed on to our top three developments from 2021. And coming in at number three is a sort of multi-headed monster of the FTCs, uh, litigated hospital cases and the decisions coming out of the courts in Jefferson Einstein and Hackensack Inglewood in particular. So take it away, John.

Speaker 4:

Yeah. Thanks Jenny. So for talking healthcare antitrust, we're, we're obviously gonna be talking about hospital mergers at some point, uh, and this year's no exception, so wanted to focus on two cases as you indicated, the is a win. And the second is a loss for the FTC, at least, um, and Hackensack, um, the FTC successfully challenged that combination, um, at least at the district court level between Hackensack and Inglewood, uh, in August of 2021, uh, the, the district court, New Jersey, uh, granted the FTCs motion to, to enjoin that proposed transaction, um, the court, uh, seemed to be persuaded by the testimony of, of three outta four major payers or insurers in New Jersey, uh, quote, many insurance companies believe the proposed merger will lead to anticompetitive effects as illustrated by Ensure's testimony in their ordinary course documents. Um, I will note that, um, the FTC, uh, ha that, that, that decision rather has been appealed. Um, and that arguments, uh, I think just occurred maybe, uh, the week, uh, before last. And, um, in that case really seem to center again on an on insurance testimony, um, in particular whether certain, um, competitors to the emerging hospitals should or should not be included. So we can contrast that FTC victory, um, through the prism of insurance testimony with an FTC loss, which was in, uh, Jefferson. And in that case back in March, um, the, uh, FTC, uh, challenge, uh, the, the proposed merger of Jefferson health in Einstein, um, outside of the, the Philadelphia area and lost that, that merger challenge, which is really one of the rare losses, uh, that the FTC has count in its hospital merger enforcement, which is, uh, seen them have a, a, quite the string of success over, I guess, the last 10 years plus. And in this instance, again, viewing it through the prism of insurance testimony. Um, one of the, uh, interesting things in the opinion was the emphasis on the fact that payer testimony, my us conform to quote commercial realities and that in that instance, um, at least according to the judge in that case, that was not the case in the FTC, um, loss with respect to its alleged markets. And, and it was their first loss, I guess, in, in nearly two decades. Um, the, the stay pending appeal was not granted, uh, to the FTC. The parties were, were allowed to consummate that transaction. And as a result, um, the FTC dropped its appeal, uh, that it had, uh, had going to the third circuit after losing its preliminary injunction motion in district court. Jenny.

Speaker 2:

All right, thanks, John. Yes, certainly a busy, busy year as, as usual, uh, for the Ft C in the litigated hospital merger world. So sticking with, uh, the FTC, uh, we're down to our top two developments for 2021, and this next one is a, you know, very broad development, but, uh, we have new leadership at the FTC and, uh, there have been several, uh, new policy developments at the FTC, uh, from the new leadership. So Alexis, why don't you tell us about those?

Speaker 3:

Yeah, thanks Jenny Toran out my KEC and the rative titles. This is my plethora of policy pronouncements from the FTC, uh, and I'll I'll spare, uh, folks anymore.<laugh> after this one, um, we already touched on, uh, John did the repeal of the vertical merger guidelines, but beyond that, really, since the inauguration in January, the democratic leadership at the FTC has implemented a whole host of other policy changes, both substantive and procedural. Um, many of which were over the Senate of the two Republican commissioners at the commission. Um, for example, in February, the FTC and Indio OJ, uh, indefinitely SU suspended the early termination of the Hart, Scott Rodino waiting period, because, um, their view, there was an unprecedented volume of HSR filings that was straining agency resources. Um, so that means the suspension of early termination or et means that even non-problematic mergers and acquisitions have to wait the full 30 day HSR waiting period before they can close. Then in March, the FTC created a multi collateral working group on pharmaceutical mergers. That group is made up of state and international antitrust and competition enforcers, and is intended to revamp and strengthen enforcers approach to pharma mergers, um, all around the globe. So we're likely to see a tougher enforcement approach there in August. The FTCs bureau of competition announced it would start issuing warning letters in transactions where the HSR waiting period had expired. Um, but the agency had not completed its review of the transaction. So these form letters basically warn the parties to the transaction that the agencies reserving its right to challenge the transaction, even after of the HSR waiting period has expired. And even after the parties have closed their transaction. So, um, probably a little more barked than by, but certainly, um, if the agency were to challenge a transaction that had issued, uh, receive one of these warning letters certainly would be big news, but, um, certainly has people a little bit more guarded, um, following HSR waiting period. Um, and lastly in October, I mean, this is really only scratching the service of the changes, but, um, this, this is one of the more significant ones. Um, in October, the FTC adopted a new prior approval policy for merger consent orders. And what the policy says is that when the FTC approves a merger under a consent order, that requires divestiture the acquirer in that deal, or the merge firm in that deal must get the FTCs prior approval before they acquire any more businesses in that same market for the next 10 years. And prior approval is different from HSR where the agency would have to challenge your deal in order to block it here under prior, our approval parties have to apply to get their deal approved to the FTC and the agency can simply say no and does not have the same statutory deadline to make a decision. So, um, creates a lot of timing, uncertainty, uh, as well. The, the policy also says that this prior approval requirement will also be expanded to cover additional markets. Um, in certain instances, and the policy is also expanded to require divestiture buyers. So the parties who, uh, the company that buys any divestiture assets from the underlying merger that divestiture buyer must get the FTCs prior approval before they sell the divested assets, they acquired to anyone else in the next 10 years. So this policy is, uh, pretty significant implications for parties that are active in M and a and have deals reviewed at the DOJ, unlike the DOJ where there's no such policy, at least none, none that's been implemented to date. So, um, very significant for those involved in M and a Jenny,

Speaker 2:

Thanks, Alexis. And, uh, again, this kind of watch word, I think here is uncertainty, uh, certainly been a lot of changes and this brings us, uh, precisely to, uh, our number one development of 2020, uh, which is the white house's executive order on competition, which seems to be where, uh, a lot of these subsequent other developments are flowing from. So John, why don't you, uh, give us an overview of that and, uh, how that implements, uh, healthcare

Speaker 4:

Sure honor. To have the number one<laugh> development for 2021. And, um, shouldn't be much of a surprise here. Number one is something that comes from the white house. Uh, as, as a practitioner, I know the three of us have been doing this for a while now, and I think we would all agree that typically we don't pay particularly close attention to political developments when it comes to antitrust, but, um, this year has been an exemption exception to that rule. And I think that's, uh, uh, exemplified by the executive order that president Biden, uh, signed, uh, on July 9th, um, to address competition across a number of industries. The executive order, um, has 72 different initiatives. And it stretches across, you know, uh, as I said, a number of economic sectors, but health care is one of the main, um, industries of focus, uh, as you said, coming from the top. And so there were a number of, um, initiatives that were, uh, the particular to, to healthcare and pharmaceuticals. Um, and those include hospitals where, uh, the executive order called on the job assist department and the FTC to revise guidelines on hospital mergers, talking about how, you know, unchecked because of unchecked mergers quote, the 10 largest healthcare systems control a quarter of the market. Uh, according to the executive order, there were also parts of the order that touched on health insurance and, and directing HHS to standardized plan options on hearing aids on prescription drugs and on non-compete clauses, um, which, uh, are relatively common with respect to professionals in the healthcare arena. And so, you know, this was something that was again, um, signed into, uh, that was signed executed by the president back in July. And we can see as Jenny, I think you said a number of things have flowed from that, uh, executive order with respect to things that were undertaken by both agencies as their leadership was, um, confirmed and, and hit the ground running into the late summer and fall. And our view, I think, is also that things are really just getting started, uh, in terms of a new, uh, antitrust enforcement environment that is particularly important for the healthcare industry. And so there's a lot to look forward to as things continue to ramp up and you go forward into 2022

Speaker 2:

And you couldn't have just ended on a better segue yeah. To talk about what we should be thinking about, uh, and watching for in 2022. So we will use the rest of our time here to, uh, hop around and give our thoughts around what the top 10 things that we should be watching for in 2022, uh, start off back with you, John, why don't you give us some thoughts on whether you think there will be any DOJ activity in the insurance space in the coming year?

Speaker 4:

Yeah, sure. Thanks. And I think you look, the, the number 10 is what, what happens on the payer side, if anything, with, with respect to antitrust enforcement, if you notice a lot of what Jenny, you and Alexis and I have been discussing in terms of recent developments have been focused on providers and individuals. And so with new, uh, leadership in place at the antitrust division, Jonathan cancer has been confirmed as assist as AAG. Um, and a, uh, uh, an agency that along with the FTC is focused on the healthcare industry, you know, insurance companies, or what we call payers. Those are for a number of convoluted, jurisdictional reasons, uh, subject to, uh, enforcement by the department of justice. And I think while there's nothing concrete to point to in terms of transactions, rumor or otherwise, I think we all agree that, um, one thing we're, we're looking forward to seeing, um, uh, or anticipating seeing in 22 to is whether healthcare, whether to what extent, uh, enforcement in the healthcare industry involves commercial payers and whether it's transactions or conduct or other arrangements that they're engaging in, um, we will, uh, be, be, uh, eagerly anticipating those potential developments.

Speaker 2:

Great, thanks. And so we've spent most of our time here talking today about the, uh, the white house and the FTC and DOJ and all the federal antitrust developments here, but one thing never to forget in healthcare space, uh, are the states, uh, Lexus, can you give us some, uh, previews of might be going on in the state antitrust legislative arena?

Speaker 3:

Yeah, I think, uh, listeners should definitely be, uh, on the watch for what is happening at the state level in terms of antitrust legislation and depending on what does this item could actually be higher up on our, our top 10 list. Um, I'm looking for example, at antitrust legislation, New York, which, um, in the last session passed the state Senate, but didn't pass the state assembly before the legislative session expired. Um, it it's a bill that could come back, um, this coming year and, and it would result in significant changes to state antitrust law. And while it's at least, um, it seems to be intended to be directed at so-called bay tech. Uh, it is not limited in the terms that way, so it could sweep in healthcare in many other industries. So for example, the bill would create what's called an abusive dominance standard. It's a standard that you see in Europe, the it's unprecedented in the us. Um, so for example, the bill would presume that a firm and is dominant if it either has a market share over 40%, which is generally lower than the monopolize, um, standard, um, market share you need in the us. Um, second, it would, um, make unlawful a firm's unilateral power to set prices, terms, conditions, or standards, um, whatever that means. And third, it would make unlawful the quote unilateral power to set wages again, um, unclear what that exactly means, but I think the ambiguity creates some risk. Um, the other thing that's significant about that bill is whereas federal Andrus law really only imposes criminal liability for price fixing and other hardcore collusion between two firms. The New York bill would actually criminalize what we call unilateral conduct like Monopoli or things that a, a firm on its own does. Um, and so under that bill, uh, firms or companies would be subject to criminal fines up to a, a million dollars and individuals would be, um, liable for fines up to 1,000,004 year jail terms. Um, on the other side of the country, California is also looking at potentially revamping its antitrust law. So, um, stay tuned because as they say, the, uh, states now seem to be laboratories of antitrust reform. Jenny,

Speaker 2:

Thanks, Alexis. So, uh, I have the honor of delivering, uh, development or thing to watch for number eight. Uh, and this is a little bit, uh, over, towards the pharmaceutical side of things, but the thing that we should be keeping an eye out for is there is an ongoing trial that should be, uh, starting today. In fact, um, in the FTC and various state AGS, uh, case against Beira pharmaceuticals, which is the company, uh, associated most notably with, uh, its executive Martin, the infamous pharma bro. And just as a recap, uh, back in January of last year, the FTC and the New York state ag filed a complaint in New York federal court against, uh, the company, uh, as well as to his of its executives, Mr. SRE, and, uh, Kevin, the lady as well as Vere's parent company. Um, FIUs, uh, the complaint alleged that, uh, the part engaged in anti-competitive scheme in order to preserve a monopoly over the company's to assmosis drug, uh, prim the case was later joined by several other state AGS from California, Illinois, North Carolina, Ohio, Pennsylvania, and Virginia. So the FTCs and the state AGS brought their claims under sections one and two of the Sherman act also section five of the FTC act, as well as the various state antitrust laws. And the crux of their complaint was at the company had acquired the drug and then prevented, uh, their generic drug maker rivals from obtaining the samples that they needed, uh, to develop their own generic versions of the drug. And also they reached deal with the sole us supplier of the drugs, active pharmaceutical ingredient, which prevented, uh, sales to their generic rivals. So recently the most current development is that, uh, the company and their parent company, as well as the former CEO settled the case against them just before trial, uh, a couple of weeks ago, this deal calls for the com to pay 10 million up front plus up to 30 million over 10 years. It also bans, uh, Mr. Mala from most roles in the pharmaceutical industry, including, uh, restrictions on his ability to own, uh, ownership interests in companies in the, in the industry, uh, for seven years. So this case is really a notable example of one of the cases that's been impacted by the Supreme court's decision in AMG capital management came out earlier in the year and curtailed the FTCs ability to seek restitution dis discouragement and other equitable monetary relief and Durst section 13 B of the FTC act, uh, and section 13 B of the FTC act was a common vehicle for the agency to, um, bring cases in federal court and seek monetary relief, uh, in particular in conduct cases often involving pharmaceutical, uh, company conduct behave. So with the Supreme court decision, uh, negating the FTCs ability to get that relief. Uh, this case is notable here in particular because the state antitrust laws, uh, in which the state AGS brought their cases still, uh, provided for equitable monetary relief. And therefore the settlement could still be supported with, um, dollar, um, payments. So with this settlement of the company and, uh, his co-defendant co-executive this leaves, uh, Mr.<inaudible> to face his trial alone. And is most of you probably know he is still in prison for securities fraud from role years ago, and he will go to, uh, trial with the bench trial starting today, December 14th. So it'll be interesting to see, um, how that shakes out, uh, going forward and sticking with the FTC. Uh, our number seven thing to watch for in 2022 is, uh, the potential confirmation of Alberto Bedoya as the fifth FTC commissioner. Alexis, do you wanna give us some preview

Speaker 3:

On that? Yeah, thanks, Jenny. Um, so this fall, the president nominated Bedoya to serve as the third Democrat on commission. Uh,<inaudible> is a Georgetown law professor and he's the director of their center on privacy and technology. Um, not surprisingly his work focused on priv privacy issues, uh, particularly how technology affects people of color immigrants and workers. So he doesn't really have any significant interest experience as far as I could tell. Um, so his expertise really aligns with the FTCs consumer protection mission. Um, so he's likely to bring a pretty strong privacy lens to the commission's work. Um, and as privacy becomes potentially a element of antitrust analysis in cases, um, there's likely to be a melding of, of his work and the commission's competition work. Um, but I think the real import is when, if and when he gets, um, um, confirmed and sworn in, he would, I expect would be a pretty reliable third vote that will help, uh, the majority kind of pick up where they left off when they had three Democrats, um, earlier in the year on, on various policy changes and being able to get through, you know, three, two votes again, as they were earlier in the year, um, Bedoya did get a split 14, 14 vote in the Senate commerce committee a couple weeks ago. Um, but I understand that there are procedural mechanisms for, um, the Democrats in the Senate to forward with his nomination, if they stay United in their votes. And, you know, the grapevine is apparently predicting that he will be confirmed probably by January. So, uh, keep watch for, for that. Okay.

Speaker 2:

All right, Alexis. So I think that we are going to, uh, stick with you, uh, for item to watch in the number six. And you told us just a few minutes ago about the developments on the legislative front, in the states. Can you give us a heads up on what might be coming, uh, from the Congress?

Speaker 3:

Yeah. Um, so there are a bunch of bills, I think, around six that made it out of, um, the, how a judiciary committee this past summer, um, several which had Republican support. Um, I think those have seem to slow down. Uh, and then on the Senate side you had a number of antitrust bills introduced as well, including Senator Klobuchar, um, competition and antitrust law enforcement reform act or Cal Clara. And that bill would be really sweeping changes to antitrust law, to toughen enforcement, both on the merger side and on the conduct side. Um, and, um, the provisions there wouldn't be limited just to the tech industry, which a lot of these bills are, um, at least focused on anyway. Um, you know, and the November elections are that far away and I'm seeing early predictions that control of the house and Senate could flip to the Republicans. So there's really only, um, a little time left for Democrats to try to pass these bills. And there's obviously a lot of issues that are occupying, uh, Congress this time, whether it's COVID, you know, keeping the government running, et cetera. And with both bills in the Senate need 60 votes. I I'm a little less, um, I'm more skeptical that we'll see anything at the federal level and, and maybe a little more, um, um, optimistic or, or think the state legislation than I mentioned earlier probably has better chances, but, you know, certainly a federal legislation passes. It could have significant implications for interest enforcement.

Speaker 2:

Okay. Thanks Alexis. Yes. Uh, certainly always an interesting, uh, guessing game parlor game for, for DC. And I trusts, uh, lawyers to speculate on, on where things may be headed, uh, on the, but moving to our number five development, uh, is the FTC possibly taking some things into their own hands, uh, in response to, uh, the congressional lack of, uh, success at passing legislation. And the FTC is engaging in rule making on various issues, including, uh, exclusive contracts and noncompetes. So John, let us know what, uh, what's been going

Speaker 4:

On that. Yeah, certainly something to look forward to. I mean, back in the, the Genesis of this is back in 2020, um, a number of interest groups, including open markets Institute, um, file the, or, or were encouraging the FTC to exclusionary contracting certain types of it. In fact, open markets Institute filed a petition, I think in July of that year, imploring the FTC to take action and then sort of nothing happened until relatively recently when the FTC started soliciting comments on rule making, um, with respect to exclusive dealing or exclusionary, um, contr tracking, and the reason why this is important for healthcare and I trust is that in the industry, in, in, in I think our collective experience, we would agree that, um, exclusive contracting particularly on the provider side, um, is certainly common in certain practices in order to, you know, keep, um, track of quality metrics and the like, and so, so should the FTC take action, um, in this arena, not just through enforcement action, but through rule making, which would be pretty extraordinary and hasn't happened for some time, it's something that could potentially have a pretty serious impact on the industry at large. And so we're focused to see a, what the FTC does, if anything, with respect to rule making, um, and have they look through some of the comments? I think there are arguments on, uh, various sides as to whether the FTC even has the authority, but then B if the FTC does do, um, some rule making, whether it's with respect to exclusive contracting or other practices, what the challenges, um, and probably wouldn't happen just in 2022, but down the road, what challenges, um, that would precipitate and then, um, whether, uh, and under what circumstances the FTCs authority to engage in rule making in certain ways would be, um, upheld by court.

Speaker 2:

Thanks, John. So sticking, uh, with, uh, the agencies we've, you know, talked a lot about the developments at the leadership level of the agencies and the commentary that came out of the white house. What do you think Alexis, uh, are the likelihood of the agencies taking in enforcement action on the basis of some newer theories that have been espoused by current agency leadership or, uh, sort of their compatriots that are in the white house?

Speaker 3:

Yeah, it certainly seems the leadership is very much thinking about and talking about broadening the lens that gets brought to antitrust investigation ins to look at a wider range of, of issues and potential theories of harm, everything from the role of private equity and transactions and competition to labor market harms to, um, the effective transactions on not just consumers, but competitors and workers, and a whole range of issues. And one theory that I'll be watching for in 2022. And that appears to be getting closer attention already, um, is what we call cross market merger theory. You know, in a nutshell, there's economic literature out there that says cross markets mergers between say healthcare provider in different markets, but adjacent markets that the, those transactions are associated with higher price increases compared to mergers involving providers in non-adjacent markets. Um, but wouldn't be, um, in the same market under a traditional antitrust, you know, section seven in the Clayton act approach, at least as the FTCs been litigating these hospital merger cases recently, I think there some dispute, um, about whether you can maintain that cross market, um, theory of harm under section instead the Clayton act and whether the FTC will actually bring, uh, a case on that theory, which would be unprecedented, unprecedented. Uh, but you know, we hear that that theory is getting some play in some investigations. There seems to a protracted review right now ongoing about the spectrum Beaumont merger, which, you know, by my quick look, doesn't seem like there's any real overlap. Um, there, that that likely suggests that cross market theory may be getting a, a pretty close look in connection with that deal. So, um, keep watch on that case, cuz that might be the Canary in the coal mine for, um, the agency looking and bringing, uh, cross market merger theory to, to bear.

Speaker 2:

Okay, awesome. We're coming in our home stretch here. So John, you told us earlier about the FTCs withdrawal of the vertical merger guidelines. What do you see going forward in terms of the agency's, uh, pronouncements on, uh, vertical merger guidelines or even horizontal merger guidelines in the current year?

Speaker 4:

Yeah. So in response to the executive order, Jenny, which I, I, um, talk about is our number one, um, development in 2021, the DOJ, uh, FTC both announced that the agencies will review, um, the jointly issued horizontal merger guidelines last updated in 2010. And of course, um, the vertical merger guidelines, which I indicated, uh, had the, uh, or talked about, I had discussed that the FTC had yield a laterally withdrawn earlier this year. And so, you know, there's already a lot on the plate, uh, plates of, of both agencies that, um, enforce the federal antitrust laws, uh, the federal agencies. And so we will see what happens in this space, um, whether we get updated and revise guidelines, uh, there, uh, for horizontal transactions or for vertical transactions

Speaker 2:

Coming back for our top two. Uh, also circling back to one of the other cases that we talked about as one of our key developments from 2021, Alexis, what do you see coming forward in the coming year in the Illumina GRA, uh,

Speaker 3:

Case? Yeah, this this'll be a big one. As I, as I mentioned earlier, this is, uh, the FTCs first, you know, fully litigated vertical merger in, in decades. It's the first fully litigated virtual merger case since the DOJs, um, challenge to the at T time Warner vertical merger, which they lost, um, in, in 2018 and then was sustained on appeal. Um, so, you know, this is the next big sheet of drop in vertical mergers. It's gonna be a significant decision. Um, that said whichever party loses the case is almost surely likely to appeal that decision, uh, of the ALJ two, um, the next level, which, uh, in the case administrative litigation means the FTC, uh, the full commission itself, which voted out the complaint. So from there, it could even go up to a, a circuit court. So, um, it it's possible. Um, we could see a decision at least from the commission by next year, but it's also possible given the action in Europe on the transaction. Um, we may have a decision that could, um, really either put an end to that deal or, or maybe mean the FTCs decision is all that more important either way. I think we really have to stay tuned because this has, um, a lot of import for the FTCs ability and interest in pursuing vertical mergers and live implications for, um, all the vertical integration that we're seeing across the healthcare sector. So, uh, very much a case to watch.

Speaker 2:

Yes, absolutely lots of moving parts there. So we will honor John with our, uh, number one thing to watch for in 2022 and this being a H L a and us being, uh, you know, M and a, uh, hospital merger nerds. Why don't you forecast what we might see from the third circuit in the Hackensack Englewood appeal? Well,

Speaker 4:

Who knows, I'm not gonna hazard a guess, but, um, as I mentioned earlier, I think oral or arguments were just a week before last, and it really seemed to be that the central issue, uh, at the third circuit, um, as to whether to uphold the lower court's decision to enjoy the transaction between Hackensack and Englewood is whether, um, hospitals outside other hospitals, um, other than the merging parties outside of Bergen county should be included in the market and therefore cons rain prices with the FTC appearing to rely very heavily on payer testimony and the parties arguing that the econometric modeling that they had done supports a wider, uh, geographic market, therefore, uh, more competition and thus making the transaction, uh, not illegal under section seven in the Clayton act. So that was a mouthful, but, uh, we will see, um, you know, it's, it's coming out of the third circuit, which is a very active court as, as the three of us and many of our listeners know in the antitrust arena. And so it, it clearly, uh, at least in our collective view is the number one thing we're looking forward to most, uh, not generally, but when it comes to healthcare antitrust enforcement in the United States. And so we will see, uh, when that opinion comes out, I'm sure there'll be lots of great content out there from HLA and others, uh, that analyze, uh, that decision. And we'll see what impact it has on, uh, broader trends in, uh, uh, hospital merger enforcement going forward.

Speaker 2:

Awesome. John Alexis, this was so much fun. Thank you for enjoy, uh, inviting me to your party. Uh, really, uh, had a, uh, great time listening to you and getting your thoughts on all of these amazing developments over the course of the last year. When you sit down and think about it, uh, it's really mind boggling how to pick 10. Uh, so, uh, thank you again for your expertise and, uh, your good humor in sharing all of this information with us and our a H L a listeners. I hope everyone has a wonderful 2022.

Speaker 1:

Thank you for listen name. If you enjoy this episode, be sure to subscribe to a H L a speaking of health law, wherever you get your podcasts to learn more about ALA and the educational resources available to the health law community, visit American health law.org.