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Enforcer Insights: An Interview with Peter Mucchetti

Peter Joseph Mucchetti


  • The FTC and DOJ are signaling increased aggressiveness in antitrust enforcement and examination of concerns beyond historical consumer-welfare considerations to include ESG (environmental, social, and governance) and equity factors.
  • Pursuant to a recently announced policy shift, DOJ has brought three criminal labor-market cases charging wage-fixing and no-poach agreements in the healthcare sector.
  • The agencies should consider updating the 1996 Healthcare Guidelines regarding steering restrictions in hospital-payer contracts, the acceptable structure of hospital discounts to payers, and lessons from the COVID-19 crisis on how competitors may collaborate to address healthcare crises.
Enforcer Insights: An Interview with Peter Mucchetti
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Peter Mucchetti is a partner at Clifford Chance in Washington, D.C., specializing in antitrust and litigation matters, including in the healthcare, technology, and consumer goods sectors. He has more than two decades of antitrust litigation, investigations, and merger clearance experience.  Prior to joining Clifford Chance, Peter worked at the U.S. Department of Justice (“DOJ”) Antitrust Division, where he served as the Chief of its Healthcare and Consumer Products Section.  While at the DOJ, among many cases, Peter oversaw the clearance of the CVS/Aetna merger, the successful challenge of the Anthem/Cigna and Aetna/Humana mergers, and multiple litigations concerning hospital system conduct, including United States v. Carolinas Healthcare System (W.D.N.C. 2018) and United States v. Hillsdale (E.D. Mich. 2018).  In this issue, we discuss the antitrust landscape with Peter from his view as a recent former enforcer.

New Issues in Healthcare Antitrust

There is a lot of debate about rethinking the approach to antitrust analysis.  How would you summarize the status quo and proposed changes?

Congress, the antitrust agencies, consumer groups, and the business world are devoting a tremendous amount of resources towards re-examining the appropriate scope and application of competition law. The changes being made at the Federal Trade Commission (“FTC”) by Chair Lina Khan show both how antitrust policy is being reconsidered and what the future holds for many merger and conduct matters. These changes include an increased aggressiveness in antitrust enforcement and examination of concerns beyond historical consumer-welfare considerations. Spurred on by a recent Executive Order from President Biden, other agencies also are searching for new ways to promote competition.

For example, in July 2021, the FTC rescinded its 2015 policy statement concerning Section 5 of the FTC Act. That statement essentially limited the FTC’s application of Section 5 to traditional consumer welfare-enhancing situations. Signaling their desire to more aggressively and expansively use Section 5, Chair Khan and Commissioners Rebecca Slaughter and Rohit Chopra said that the policy inappropriately constrained the agency’s use of its authority to stop anticompetitive business tactics. Using strong language, they argued that the 2015 policy statement was “shortsighted” and “doubled down on the Commission’s longstanding failure to investigate and pursue ‘unfair methods of competition.’” Commissioners Noah Phillips and Christine Wilson voted against the majority, an outcome that we may well see in many future matters.

Continuing this expansive trend, a majority of the FTC Commissioners voted in September to withdraw the FTC’s approval for the Vertical Merger Guidelines. The Guidelines, which had been approved by the FTC and DOJ just one year earlier, provided companies with increased transparency about the framework that the agencies use when assessing vertical mergers. DOJ has stated that, while it will currently leave the Guidelines in place, it is reviewing whether to update the Guidelines. Hopefully, the agencies will explain to the public the criteria that they are currently using to consider vertical issues as that will allow consumers, parties, and other industry participants to better engage with the agencies on these issues.

Of course, the fact that the underlying antitrust laws have not changed will limit the FTC's and DOJ's ability to successfully litigate more matters. But Congress is considering easing the standards that the agencies must meet to establish an antitrust violation. The combination of aggressive antitrust agencies and lower thresholds for proving competition violations would significantly increase the number of antitrust legal challenges.

Another important development is that DOJ and FTC are placing more emphasis on factors that go beyond traditional notions of consumer welfare to consider ESG (environmental, social, and governance) and equity factors. For example, during an ABA panel this summer, DOJ and FTC officials commented that antitrust enforcers have carefully examined certain transactions to better understand how they impact seniors and the lower-income populations. Businesses are also prioritizing ESG improvements, and the ability to explain how a transaction or policy will affect these factors is becoming increasingly important.

Finally, antitrust policy has garnered significant attention beyond the FTC and DOJ. In July, President Biden signed an Executive Order on Promoting Competition in the American Economy, a sweeping statement on the administration's focus on antitrust enforcement. The Order contains 72 initiatives and calls to action more than a dozen federal agencies in what the Order terms a "whole-of-government approach" to competition. Notably, the order highlights several markets, including labor and healthcare. DOJ and the FTC will continue to lead the administration's competition efforts, but the Department of Health and Human Services, the Department of Transportation, and other federal agencies can also be expected to significantly increase their competition advocacy and enforcement efforts.

Are there particular applications to healthcare settings?

Yes, in part because promoting competition in healthcare markets has been and continues to be a major focus of federal and state competition agencies across a variety of markets. For example, in labor markets, DOJ announced in October 2016 that it would criminally prosecute anticompetitive wage-fixing and no-poach agreements between competitors that are not reasonably related to any pro-competitive purpose. True to its word, DOJ has brought three criminal labor-market cases, all in the healthcare sector. In United States v. Jindal, the DOJ brought criminal charges against the former owner of a Texas healthcare staffing company for allegedly conspiring to fix wages for physical therapists and physical therapist assistants. In its second case, United States v. Surgical Care Affiliates, the DOJ indicted an outpatient medical care company for allegedly agreeing with competitors not to solicit each other's senior-level employees. In the last case, United States v. Hee, a federal grand jury in Las Vegas returned an indictment charging a health care staffing company and a former manager with conspiring to allocate employee nurses and to fix the wages of those nurses.

Federal and state antitrust agencies are also more closely considering the potential for disparate impacts on vulnerable communities when evaluating business conduct and mergers, especially in the healthcare sector. In the Hee case, for example, the DOJ noted that the alleged allocation and wage-fixing scheme was especially harmful because it targeted nurses who served medically fragile students.

Two recent merger cases also show the DOJ's and FTC's concerns about vulnerable communities. In United States v. Aetna, the DOJ and nine attorney general offices sued to block the merger of two of the largest health insurers in the United States—Aetna and Humana. The DOJ's case focused on competition in the sale of Medicare Advantage health plans for seniors. The DOJ emphasized that the loss of competition between the parties would have particularly harmed seniors, who tend to have lower and fixed incomes, and who are twice as likely to visit a doctor.

And in the Jefferson-Einstein case, the FTC and the Pennsylvania Attorney General unsuccessfully challenged the proposed merger of the Jefferson Health System and Albert Einstein Healthcare Network. The government plaintiffs argued that the case was especially important in part because the largest of the acquired hospitals, Einstein Medical Center Philadelphia, was a "safety net hospital" with eighty-seven percent of its inpatients being government‐insured.

We can see how these new issues could lead to more deals being blocked. But could they also help some deals?

There are two sides to this issue. Just as agencies consider the potential for harm to vulnerable populations, they should also consider the potential benefits from efficiencies that would help vulnerable populations. For this reason, parties should be prepared to demonstrate how vulnerable populations would benefit from proposed mergers or business conduct. Mergers and business conduct may produce synergies that lower healthcare costs, improve quality, and enhance innovation. In turn, these procompetitive changes can have an outsized benefit for vulnerable populations. In the Jefferson-Einstein case, for example, the parties argued that the merger was motivated in part to improve the financial situation driven by its payor mix, which in turn would enable the hospitals to better serve government-insured patients.

Parties should also examine how past mergers or conduct improved service offerings and enhanced access to care. Evidence that past transactions and conduct benefitted consumers is one of the most effective ways to demonstrate that similar actions will help vulnerable populations and other consumers.

Analysis of Vertical Healthcare Mergers

There has been a lot of debate about the Vertical Merger Guidelines. The DOJ has, thus far, stood by the guidelines from 2020. Do you think the Guidelines reflect the DOJ’s approach to vertical mergers?

Yes, the Vertical Merger Guidelines fairly reflect how the DOJ approaches vertical issues. And antitrust practitioners agree in many key respects on the analytical framework for examining vertical mergers and conduct. To the extent that the FTC intends to apply different standards for looking at vertical issues, consumers would be best served if the FTC articulates its standards and gives the public an opportunity to comment on those standards. With the 2020 Vertical Merger Guidelines and other significant policy updates, both agencies have effectively used the public-comment process to improve upon initial drafts.

To that end, what DOJ healthcare cases illustrate the approach to vertical mergers?

Two helpful examples are the DOJ’s review of the CVS-Aetna and Cigna-Express Scripts mergers. In both cases, the DOJ released a public statement explaining its framework for considering vertical issues and a high-level explanation of the facts that supported its conclusion.  For example, in Cigna-Express Scripts, the DOJ considered how the merger would affect Express Scripts' incentive to provide competitive PBM services to Cigna’s health insurance rivals.  Using a traditional framework for vertical analysis, the DOJ found that the merger likely would not enable Cigna to increase costs to Cigna’s health insurance rivals because of competition from stand-alone and vertically integrated PBMs. In the CVS-Aetna merger, the DOJ considered whether the merger would raise the cost of (i) CVS/Caremark’s PBM services or (ii) CVS's retail pharmacy services to Aetna’s health insurance rivals. Again, applying traditional vertical principles, the DOJ determined that the merger likely would not cause CVS to increase the price of either service to Aetna’s health insurance rivals due to competition from other PBMs and retail pharmacies.

What are cases to watch going forward?

The UnitedHealth-Change Healthcare merger review is one to watch. In January 2021, UnitedHealth Group announced that it planned to acquire Change Healthcare for $13 billion. In March 2021, the DOJ issued a second request for further information to the companies. The proposed merger raises both horizontal and vertical questions, and has drawn opposition from some industry participants. Key issues to be determined are what markets the DOJ believes are affected and the scope of an acceptable remedy, if any, for any impacted markets.

Joint Ventures

The DOJ successfully challenged Geisinger's joint venture. Can you summarize that case? What is notable about it?

In February 2019, Geisinger Health and Evangelical Community Hospital agreed to a partial acquisition where Geisinger would acquire a 30 percent interest in Evangelical for $100 million. The DOJ filed a complaint challenging the transaction in August 2020. Geisinger operated 12 hospitals in Pennsylvania and New Jersey. Evangelical was an independent community hospital in nearby Lewisburg, Pennsylvania. The DOJ alleged that the transaction created significant competitive entanglements between the hospitals, reducing their incentives to compete against each other and increasing the likelihood of coordination.

In March 2021, the DOJ announced a settlement between Geisinger and Evangelical. As part of the final judgment, Geisinger's ownership interest in Evangelical was capped at a 7.5% passive interest.

What is notable about the case is that DOJ challenged a partial acquisition, which shows that companies should not expect a pass for transactions only involving the acquisition of a minority stake. The case is also notable because DOJ alleged the existence of a no-poach agreement between the two companies. As a result of the DOJ's lawsuit, a class action lawsuit was filed in February 2021 against Geisinger and Evangelical, alleging that the hospitals agreed not to recruit each other's health care professionals. This case is another example showing the increasing importance of antitrust labor issues, particularly in healthcare.

The Horizontal Merger Guidelines spell out how the agencies approach joint ventures.  Is that guidance applicable heading forward?  Did the Geisinger case follow that approach?

The Horizontal Merger Guidelines—and much of the other guidance provided by the antitrust agencies, such as the Guidelines for Collaboration Among Competitors—continue to provide sound guidance on how the agencies analyze mergers, partial mergers, and joint ventures that are similar in effect to mergers. And the DOJ followed those guidelines in its approach to the Geisinger case.

Is there room for joint ventures that go beyond the Geisinger settlement?  For example, could a different joint venture among competitors go above 7.5 percent ownership interest?  If so, what should companies consider in structuring a joint venture?

As with many antitrust issues, it all depends on the facts of the particular situation. But the considerations for a joint venture are often essentially the same as for a merger. For example, the analysis would consider how closely do the parties compete, the amount of market concentration, ease of entry, and the procompetitive effects of the joint venture.

I do not believe that the Geisinger settlement should be read to mean that the DOJ (or the FTC) will always allow a company to purchase up to 7.5 percent of a competitor. Rather, the DOJ was comfortable with this ownership percent for limited reasons. As explained in the Competitive Impact Statement, the 7.5 percent ownership interest was obtained in exchange for the approximately $20 million already paid by Geisinger to Evangelical, and Evangelical could only use the $20 million for two specified projects: improving Evangelical's patient rooms and sponsoring a local center for recreation and wellness.

Criminal Cases

We have recently seen several criminal antitrust cases brought by the DOJ.  Can you summarize these cases?

In March 2020, Florida Cancer Specialists & Research Institute, LLC ("FCS") was charged with participating in a conspiracy to suppress and eliminate competition by allocating medical treatments for cancer patients between 1999 and 2016. The DOJ alleged that the parties agreed to allocate medical oncology treatments to FCS while allocating radiation oncology treatments to a competitor located in three Florida counties. FCS entered into a deferred prosecution agreement ("DPA") with the DOJ under which FCS paid $100 million in criminal antitrust penalties to resolve the federal charges and paid $20 million to the state of Florida. In addition, the founder and former President of FCS was indicted; that case remains ongoing.

In another case, the DOJ has charged seven generic drug manufacturers with per se criminal violations including conspiring to fix prices, rig bids, and allocate customers for generic drugs between May 2013 and December 2015. Five of the companies resolved the charges via DPAs, paying a combined total of more than $426 million in criminal antitrust penalties. Two additional companies await trial. In addition, four senior executives have been indicted on criminal antitrust charges, with three entering plea agreements, averting prison sentences of up to 10 years each provided that they continue to cooperate with the government.

What are some of the reasons why the DOJ uses DPAs with healthcare companies?

First, as background, a DPA is an agreement under which the government brings charges against a defendant but agrees not to move forward with its case. In exchange, the defendant agrees to abide by certain conditions, admit wrongdoing, and pay a hefty penalty. In addition, the recipient must take on certain additional burdens, such as agreeing to cooperate with the DOJ's investigation of other conspirators and even the company's employees. If the defendant abides by the terms of the DPA for a designated period (usually several years), the DOJ will ultimately drop the charges. If, however, the recipient fails to abide by the terms of the agreement, the DOJ can enforce the indictment against the company, relying on the company's admission of criminal wrongdoing to swiftly obtain a criminal conviction.

In the healthcare sector, the DOJ may be hesitant to bring a criminal case because collateral consequences may harm consumers. For example, a criminal guilty plea might—by operation of law—bar a company from participating in federal healthcare programs. In part for this reason, the DOJ may opt for a DPA.

Is recent criminal enforcement a sign of more to come?

I believe so. DOJ has placed significant emphasis on criminal enforcement in the healthcare sector over the last few years, including bringing three criminal no-poach and wage-fixing cases in the healthcare industry. These efforts squarely support President Biden's call for vigorous antitrust enforcement.

Concluding Thoughts

We have talked a lot about changes in antitrust enforcement. What are some changes you would like to see in the context of healthcare related enforcement?

One policy statement that would benefit from updating is the 1996 Statements of Antitrust Enforcement Policy in Health Care (the "Healthcare Guidelines"), which address a variety of issues concerning healthcare providers and health insurance companies. Some of the statements have aged well and provide regularly used guidance. But other statements have largely been ignored or effectively been replaced by subsequent guidance. Three areas where these guidelines can be updated concern: (1) steering restrictions in hospital-payer contracts; (2) the acceptable structure of hospital discounts to payers; and (3) lessons from the COVID-19 crisis on how competitors may collaborate to address healthcare crises. These statements would also benefit from the creation of new "safety zones" describing conduct that the agencies will not challenge under the antitrust laws absent extraordinary circumstances.

Given the shifting antitrust landscape, what advice would you have for companies navigating healthcare deals in front of the agencies?

I would recommend that the parties be prepared to affirmatively explain why the proposed transaction helps consumers. Also, companies should take an "eyes wide open" approach given the heightened level of scrutiny that mergers are receiving. Finally, companies should be realistic in what remedies might be approved, as the agencies are not likely to accept only behavioral or piecemeal remedies.

This article was prepared by the Antitrust Law Section's Health Care & Pharmaceuticals Committee.