Life Sciences and Health Care Companies Under the Competition Microscope: New Cross-Government Initiatives Seek to Expose Antitrust and Other Violations

U.S. antitrust enforcers launched a flurry of initiatives in the first half of 2024 to identify and prevent antitrust and other violations in life sciences and health care. Among these are two cross-agency Requests for Information (RFIs) about anticompetitive transactions, an online portal to enable anyone to report anticompetitive business practices, a new Department of Justice (DOJ) task force and a new Federal Trade Commission (FTC) investigation into certain Teva Pharmaceuticals’ patent listings in the Orange Book. 

While life sciences and health care companies are no strangers to antitrust scrutiny, the new initiatives are different in several important ways:

• Reflecting the Biden administration’s “whole of government” approach, antitrust enforcers at the DOJ and FTC have joined forces with the Department of Health and Human Services (HHS) on several initiatives. 
• The efforts have been framed in rhetoric about “corporate greed” and companies “generating profits [ ] at the expense of patients’ health.” The government appears to purposefully build a negative framing of many industry players, including private equity, pharmaceutical companies, alternative asset managers, health plans and health systems.
• Antitrust enforcers are citing a company’s record of compliance as a reason to block deals that would otherwise not violate antitrust laws while using the merger review process to uncover violations unrelated to the deal.
• Antitrust enforcers are broadening the scope of purportedly “anticompetitive conduct” to include conduct not traditionally viewed as relevant to antitrust enforcement, including the use of health care data, transparency in pricing terms, workplace safety and “worker choice,” among other things.
• Enforcers are showing a willingness to work through other agencies’ enforcement mechanisms. Most recently, the FTC pressured companies to delist patents in the Food and Drug Administration’s (FDA) Orange Book, by first reporting to the FDA the patents that the FTC believed the companies improperly listed. 

Managing Antitrust Risk

These developments require life science and health care companies of all types and sizes—as well as private equity and other investors in these industries— to evaluate and potentially update their approach to managing antitrust risks. The current enforcement paradigm is increasingly expansive in its view of what constitutes a violation. Its focus extends beyond the traditional economic analysis of specific deals or agreements to assess whether the investigated companies have business models that harm competition or prior compliance missteps.

Given the changes in antitrust enforcement, companies in health care and the life sciences should approach risk management more holistically. They should:  

• Remain mindful of how enforcers, elected leaders and the public likely will perceive their business model and practices, and then work with counsel to demonstrate how the company is a value creator and not a value extractor. 
• Take a cross-practice approach to compliance efforts, rather than keeping those efforts siloed. That is especially true for any regulations related to patient outcomes, health care workers or health care costs. 
• Update policies on whistleblowers.
• Review competition compliance policies and training in light of the expanding scope of conduct deemed to be purportedly relevant to antitrust enforcement, including merger enforcement. 
• Engage with counsel immediately if you identify potentially concerning conduct.

M&A:  Cross-Agency Efforts Broaden the Scope of Antitrust Concerns 

In December 2023, the White House announced “a cross-government public inquiry into corporate greed in health care.” Three months later, the DOJ, FTC and HHS issued a joint RFI to “seek input about how private equity and other corporations’ increasing power and control of our health care is affecting Americans.”  

This inquiry focuses less on horizontal combinations between large competitors and more on transactions that historically have received less scrutiny, including serial acquisitions (roll-ups) of small companies, minority interest transactions, vertical integrations and private equity transactions that reduce the quality or resilience of acquired companies. 

While we have seen two agencies partner, it is rare to see all three aligned on a single initiative. The DOJ, FTC and HHS are also sharing data to identify consolidation trends and determine how they correlate to health care costs and outcomes.

Hostile Rhetoric 

This new initiative asks the public to expose how “corporate greed” and a desire to “generate profits” harms health care. While enforcers likely never would have agreed with Wall Street’s Gordon Gekko’s famous decree that “greed, for lack of a better word, is good,” the rhetoric shows an important shift in thinking for antitrust enforcers. 

Instead of focusing on a technical economic analysis of the competitive impact of specific transactions, agreements or practices, antitrust enforcers are increasingly framing the antitrust analysis as a morality play in which profit incentives undermine the wellness of patients and health care workers’ prospects alike. 

The initiative has the support of many political leaders, and the framing echoes language used in public hearings. It is possible, if not likely, that these efforts will generate congressional requests and testimony.

Prior Compliance History Impacts Future Merger Enforcement 

Demonstrating economic efficiencies and lack of any reduction in competition may not be enough to get a deal through if one of the parties is viewed as a bad actor. Recently, prior compliance history has been cited as a reason to block otherwise lawful deals. For example:

• In the FTC challenge to the Amgen/Horizon Therapeutics deal in 2023, the parties were not competitors and did not have any vertical overlaps. Yet the FTC cited a concern that Amgen has historically used bundled rebates to exclude its competitors and would do the same to exclude Horizon’s competitors after it owned Horizon. 
• FTC Commissioner Rebecca Kelly Slaughter argued in a 2024 enforcement action that a party’s “history of anticompetitive conduct” is relevant to analyzing the “likely competitive effects of a merger” and that such a consideration is “particularly relevant in pharmaceuticals.”

These new enforcement initiatives go hand-in-hand with the continued expansion of review under the new 2023 Merger Guidelines and the new Hart-Scott-Rodino (HSR) filing requirements, which are expected to be finalized imminently. The FTC’s proposed changes to the HSR filing would expand scrutiny beyond the instant deal to require companies to, among other things, submit non-deal related business plans and disclose pending investigations, prior findings, and penalties against the buyer based on wage, labor, and occupational health and safety regulations. 

Of course, what the FTC and DOJ enforcers learn in broad HSR discovery can lead to investigations of alleged non-merger violations. That happened following the reviews of the Exxon/Pioneer, Chicken of the Sea/Bumble Bee, Knorr/Wabtec and Sinclair/Tribune deals.  

Business Practices:  Cross-Agency Efforts Expanding the Scope of Anticompetitive Conduct 

Outside of merger enforcement, antitrust enforcers have also pursued a whole-of-government approach to identify anticompetitive practices in the life sciences and health care industries. 

• In February, the FTC and HHS issued an RFI to seek input on whether contracting practices by group purchasing organizations and wholesalers contribute to pharmaceutical product shortages. 
• In April, the FTC, DOJ, and HHS launched the online reporting portal, HealthyCompetition.gov to encourage the public to report health care practices that may harm competition. The DOJ and FTC will review complaints.
• In the first half of 2024, the FTC has been continuing to work with and through the FDA to identify patents in the Orange Book that the FTC believes are improperly listed and potentially delaying the entry of generic drugs. The FTC’s recent issuance of a civil investigative demand to Teva regarding dozens of Orange Book patents for Teva’s asthma and COPD inhalers is the next step in the FTC’s ongoing efforts, following a campaign to leverage the FDA and get companies to voluntarily remove hundreds of patents from the Orange Book last fall. 
• In another cross-agency effort, the FTC encouraged the U.S. Patent and Trademark Office in June to support a proposal to expand the scope of patent settlements that must be reported to the FTC, particularly in the pharmaceutical context. 
• Finally, the DOJ recently formed the Antitrust Division’s Task Force on Health Care Monopolies and Collusion. The task force “will guide the division’s enforcement strategy and policy approach in health care,” including “civil and criminal enforcement in health care markets.”  It will consider “issues regarding payer-provider consolidation, serial acquisitions, labor and quality of care, medical billing, health care IT services, access to and misuse of health care data and more.”

Seeking New Sources of Information  

In looking to enlist the public’s help in identifying anticompetitive behavior by launching the new government online reporting portal, Healthycompetition.gov, enforcers seem to be trying to tap into a longstanding use of whistleblowers to target fraud among life sciences and health care companies. 

Notably, Healthycompetition.gov contains information about the False Claims Act (FCA), including links on where to report suspected fraud, abuse, or misconduct related to Medicare, Medicaid or other HHS and other questionable business practices. The FCA is a well-established mechanism for whistleblowers to report potential fraud on the government. 

This is also a moment of growth for government whistleblower programs, chief among these the launch of new whistleblower programs announced and now being piloted by the U.S. DOJ. 

New Theories of Antitrust Harm 

Although topics like consolidation, collusion and contractual restraints reflect traditional views of antitrust harm, enforcers are also focused on other newer views of harm. The government’s online reporting portal, HealthyCompetition.gov, provides detailed “Examples of Conduct That Can Harm Competition in Healthcare,” under the following headings: 

• Limiting choice and fair wages for health care employees. 
• Preventing transparency.
• Health care contract language and other practices that restrict competition.
• Anticompetitive uses of health care data.
• Unnecessary health care provider recertification or accreditation requirements.
• Consolidation, joint ventures and “roll-ups” of health care providers or companies.
• Collusion or price fixing among competitors.

This list articulates several as yet untested theories of anticompetitive harm, including concerns about transparency of costs, use of health care data, and impacts on employee choice. 

Conduct with respect to health care data may be a particular blind spot for many companies. HealthyCompetition.gov expresses the enforcers’ view that health care companies are accumulating data at a rapid pace, that acquisition and control of large amounts of data can be used to exclude competitors, reduce innovation, determine “who gets care at what price,” surveil rivals or share sensitive information among competitors. 

In 2023, the DOJ revoked a longstanding health care policy that included a safe harbor for exchanging price and cost information under certain conditions, including that the aggregated data was managed through a third party. In 2024, multiple private suits allege that a third-party algorithmic repricing tool enables collusion among health insurers to suppress reimbursement rates for out-of-network services. 

These changes in enforcement policy provide an opportunity for companies to review their approach to managing antitrust risks. As enforcers adopt a broader view of what constitutes anticompetitive conduct, health care and life sciences companies should take a close look at their entire compliance programs as well as recent government guidance. As this is a highly regulated space, particularly for companies that receive any form of government funds, there are numerous opportunities for missteps.

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The recent evolution of antitrust enforcement in health care and life sciences presents an opportunity for industry participants to take stock and strengthen their compliance programs. Additionally, the more holistic nature of scrutiny provides opportunities for companies to show more fundamentally how they contribute innovations and services that improve health care and patient’s daily lives. 

If you have any questions, reach out to our authors (Eileen Cole, Craig Falls, Thora Johnson, and David Rhinesmith) or another member of the Orrick team.