On December 7, the Federal Trade Commission, the Department of Justice and the Department of Health and Human Services jointly announced an intent to focus on anti-competitive practices in the pharma market and in healthcare service delivery. The announcement was purposefully broad in scope, no doubt intended as a warning shot across the bow of as many business practices as possible.
The FTC declared that “rooting out unlawful business practices in healthcare markets is a top priority for the FTC,” echoing prior Presidential edicts asking for coordinated pressure by US government agencies to bring down spiraling medical bills.
It may be naive to think that anti-trust enforcement will solve all the cost burden of modern medicine (just the other day the exciting news of development of a drug to defeat Sickle Cell was tempered by its $2.2 Million price tag); government is going to have to do things that border on socialized medicine, or price control in the context of a national health crisis, as the reality of rapidly expanding medical expertise will incur huge costs which must be either recovered by market pricing or government funding.
Among the various generalized proposals, two struck me as particularly interesting.
For the first time, the Medicare/Medicaid folks are releasing the names of owners of Federally qualified health centers and rural health clinics, presumably to give non-Federal regulators and private attorneys a road-map of interlocking referrals and other arrangements which may jack up or fix market pricing.
And then there are roll-ups, which are all the rage, often driven by venture capital funds which establish a platform entity which then goes shopping for acquisitions in the perceived lucrative health-care marketplace. By definition such aggregations of providers generate pricing power in smaller markets. The enforcement of anti-trust laws against serial smaller acquisitions, although each below the size that triggers automatic financial thresholds of anti-trust review, was generally presaged by recent prior FTC/DOJ pronouncements, see the blog post herein on October 4, 2023 (“US Attacks Roll-Ups…”). Absent numerical benchmarks to inform investor funds when they are risking an actionable market concentration, PE firms may well be afraid to reach the level of local saturation which will bring down an anti-trust challenge (and risk of break-up).
In the offering materials by which PE funds raise investment to establish a med-tech roll-up platform company, it will be interesting to see what caveats are included for investor evaluation.
(Separately, today’s news reported a $41 Billion pharma acquisition. There is big money afoot in the medical fields, and hence high stakes for all players, the public and the government charged with regulating it all.)