Earlier this month, antitrust lawyers and enforcers from around the globe convened in Washington, D.C., for the annual American Bar Association (ABA) Antitrust Spring Meeting. This meeting is the largest event for the antitrust bar annually and provides an opportunity for enforcers to preview their enforcement agendas and policy objectives for the coming year.
Unlike past years, federal enforcers did not join the spring meeting over disputes with the ABA on their policy statements. Federal Trade Commission (FTC) Chairman Andrew Ferguson and Assistant Attorney General (AAG) of the U.S. Department of Justice Antitrust Division Gail Slater, however, joined a separate panel, during which they discussed the federal agencies’ outlook on key antitrust issues.
Continuing a regular theme from federal and state antitrust regulators, pharmaceutical and healthcare markets were a frequent topic of conversation and will remain a focus in the near future. This is unsurprising, considering the local nature of healthcare markets makes them particularly ripe for state antitrust enforcement and the near-constant public scrutiny of the pharmaceutical industry. Both state and federal enforcers emphasized that the recent trend toward investigating labor practices—particularly, noncompete provisions and no-poach agreements—will continue in the coming years.
Businesses in these industries would do well to proactively consider these issues to mitigate the risk of antitrust scrutiny.
Pharma and healthcare remain in the crosshairs with federal enforcers
Antitrust oversight of pharmaceutical companies has long been a staple of federal antitrust enforcement, and the current administration is almost certain to continue that trend. Federal enforcers did not discuss many specific policies, but stressed they would continue rigorous oversight of the pharmaceutical industry. While the new administration is yet to bring its first pharmaceutical antitrust case, two issues appear likely to remain a focus of the FTC:
- Orange Book listings. The last administration sent letters to several pharmaceutical companies alleging that more than 100 patents were wrongfully included in the Orange Book and that their inclusion could violate antitrust law. The FTC also filed an amicusbrief in a private case arguing the same.
- Reverse payments settlements. The FTC issues regular reports on reverse payment settlements—i.e., Hatch-Waxman settlements where the agency claims the plaintiff brand provides some form of compensation to the defendant generic in exchange for settling. The FTC’s most recent report noted that the agency had seen an increase in “quantity restrictions” in patent settlements—settlements where the generic agrees to only market a limited quantity of their product for a set period—and that in some cases these may violate the antitrust laws.
As seen with Orange Book listings, once the FTC notes that certain conduct by a pharmaceutical company may violate the antitrust laws, class-action firms and other private plaintiffs often bring cases testing those theories. While not an exhaustive list of potential risks, the above are areas where businesses will want to be particularly cognizant in the coming years to mitigate antitrust risk.
Another focus of federal antitrust oversight has been healthcare. Antitrust enforcement of healthcare providers has historically enjoyed bipartisan support, which panelists agreed was likely to continue with the current administration. Previously, the Lina Khan FTC unanimously voted to challenge several hospital mergers, including the proposed HCA Healthcare and Steward Health Care System, Novant Health and Community Health Systems, and RWJBarnabas Health and Saint Peter’s Healthcare System mergers.
One areain which panelists expect the administrations to diverge, however, is on consent decrees; they expect the current administration will be more open toremedies and pre-litigation settlements than the previous administration.For example, if two hospital chains plan to merge, the current administration may be more likely to permit the merger to proceed if the merging parties agree to sell off hospitals to eliminate competitive overlaps. While the agencies may be receptive to settlements, however, this does not mean that they will accept insufficient remedies.
Related
FTC again pushes back on Indiana hospitals' 2nd merger attempt
State enforcement on the rise
Throughout the spring meeting, state enforcers emphasized that they are poised to fill some gaps in federal enforcement that may arise under the new administration.
Increased state involvement may affect healthcare antitrust matters in important ways. First, healthcare markets are primarily local markets, and state attorneys general are arguably as knowledgeable about local markets in their state as the merging parties, eliminating any perceived advantage that merging parties may otherwise enjoy over federal enforcers.
Second, state enforcers bring additional tools to healthcare merger enforcement. Some states, like California, are using their charitable trust laws to review nonprofit hospital mergers. Other states have also tasked regulatory agencies—like Pennsylvania's Insurance Department and California’s Office of Health Care Affordability—with reviewing certain healthcare mergers. Likewise, many states have adopted, or are considering adopting, healthcare-specific premerger notification requirements which will give those states insights into mergers that may not be reportable to federal agencies.
State enforcers also criticized the FTC’s stance on Certificates of Public Advantage(COPAs), which are written approvals provided by state health departments to approve and shield healthcare mergers from state and federal antitrust review. Historically and again recently, the FTC has opposed COPAs, which has drawn criticism from states that believe access to healthcare (and other factors) is just as important as robust competition. Panelists believed that even though the FTC and states will continue to have diverging views on COPAs, the states have generally won that contest after a federal court decided that Hart-Scott-Rodino filings are not required for mergers exempt from the Clayton Act (like those that have received a COPA).
Labor enforcement will continue
Antitrust investigations into labor practices and labor markets in merger investigations were a staple of the Biden administration’s antitrust enforcement. Many observers predicted that the new administration would take a laxer view of these issues; however, state and federal enforcers both indicated they view noncompete clauses and no-poach agreements as problematic and believe the former are widely overused in employment contracts.
Indeed, Ferguson and Slater stated that vigorous enforcement over noncompete clauses were an important component of an “America First” antitrust policy. There have, likewise, been several private class actions brought relating to noncompete and no-poach agreements, including in the healthcare space.
As healthcare providers and pharmaceutical companies alike regularly include these provisions in employment contracts with doctors, researchers and other specialists, it is important to remain cognizant of these issues and ensure that employment agreements are narrowly tailored and tied to reasonable business objectives, or potentially face antitrust risk.
Ryan Maddock and Jeremy Keeney are counsels at law firm Perkins Coie. Christopher Williams is a partner at Perkins Coie.
