Mr. Jordan provided an overview of the proposed IQVIA-Propel merger and the key arguments put forward by the FTC to challenge that transaction. IQVIA, a leading healthcare data provider, proposed to acquire DeepIntent, Propel’s healthcare demand-side platform (“DSP”). Mr. Jordan explained that the FTC’s theory to challenge the transaction was based on both vertical and horizontal merger concerns. On the horizontal theory, the FTC argued that IQVIA’s Lasso and Propel Media’s DeepIntent were two leading firms providing programmatic advertising to healthcare professionals and that eliminating head-to-head competition between them would drive up prices and reduce quality and choice. On the vertical theory, the FTC argued that IQVIA’s data is a critical input for DSPs. In court, the FTC's arguments prevailed, and the judge granted the FTC’s motion for a preliminary injunction. Significantly, Mr. Jordan noted, the judge based his decision on the horizontal theory only. The court found that IQVIA and DeepIntent were significant head-to-head competitors, so the merger would likely harm competition. Ms. Batts commented that this case offers guidance to outside counsel to work on market definition earlier and look at how the agencies may perceive competitors and innovation. Mr. Andrew noted that the FTC found IQVIA’s and DeepIntent’s shares were in the 45-50% range, and that the court found that even using the market proposed by the parties, the combined share would still exceed the 30% threshold.
The discussion then pivoted to the Amgen-Horizon merger. Mr. Zach provided background about the matter and discussed FTC’s allegations against the deal. He explained that the transaction concerned two products: KRYSTEXXA, a drug used to treat chronic refractory gout, and TEPEZZA, the only FDA-approved drug to treat thyroid eye disease. Mr. Zach said the FTC's theory of harm was neither horizontal nor vertical, but rather hypothesized that, after the merger, the merged entity would be able to use bundled pricing strategies to offer discounts on its existing portfolio of blockbuster products in order to secure special placement on formularies, thereby blocking potential new competitors. Mr. Zach explained that, for the merging parties, bundling was never part of the deal rationale. Rather, the merging parties had stated from the beginning that they would not bundle their products.
A fundamental critique of the FTC's position, Mr. Zach shared, was that products the FTC alleged would be bundled are covered under different benefit types, medical versus pharmacy, which are not negotiated together. In that sense, the FTC’s theory seemed to be too speculative, and such a theory has never been adopted by a court. The case ultimately settled, with Amgen agreeing, among other things, not to bundle an Amgen product with either TEPEZZA or KRYSTEXXA or to condition any product rebate or contract terms related to an Amgen product on the sale or positioning of either one of these drugs. Ms. Batts said that the FTC's theory in this case is not novel in the sense that people have analyzed this theory; there are policy papers and law review articles discussing this issue.
The panel then discussed Illumina's proposed reacquisition of Grail. Mr. Andrew provided background on the merger and the FTC's theory of harm. He explained that the FTC's concern was the potential harm the merger would cause in the research and development space and how Illumina's acquisition of Grail would give Illumina the incentive and ability to disadvantage Grail's multi-cancer testing competitors by raising their costs or by foreclosing them from accessing Illumina's must-have technology. Mr. Andrew offered a summarized timeline of the case, including the administrative litigation at the FTC, the Fifth Circuit decision, and the antitrust review process in Europe.
Mr. Zach then shared his three key takeaways from the Illumina-Grail matter and the Fifth Circuit decision from December 2023. First, harm can occur in both R&D markets and in traditional markets involving commercialized products. Notably, the Fifth Circuit acknowledged how speculative R&D arguments may be, so these arguments have to be well supported by evidence to be successful. The second takeaway was that this was the first litigated vertical win for the FTC. The Fifth Circuit stated that the agency provided substantial evidence to support that the merger would increase Illumina's incentives to raise prices and foreclose competitors. Mr. Zach’s third takeaway was that diversion analysis is still essential even where solid qualitative evidence supports a vertical harm theory. In this case, the vertical math was not straightforward because Grail's product was the only product in the market.
Regarding enforcement, Ms. Rouse stated that the DOJ is analyzing vertical mergers in different segments of the healthcare industry. She shared that the DOJ is collaborating with the HHS, the FTC, civil and criminal investigators, academics, and experts to think about competition in the healthcare industry broadly and deal with what she described as unprecedented levels of consolidation. Ms. Rouse described the DOJ's enforcement approach as one that looks closely at how competition is really happening in each case.
The panel moved on to discuss other recent enforcement actions. Ms. Batts talked about three of the FTC’s latest enforcement actions in the provider space. Ms. Batts spoke first about the Louisiana Children's Medical Center-HCA merger. This case was different because the parties had obtained a Certificate of Public Advantage (“COPA”) for the transaction. The FTC sued to stop the integration of the hospitals, claiming that the hospitals had defied federal law by consummating their deal without reporting it to U.S. antitrust authorities and without observing the mandatory waiting period. But a federal court ruled that the FTC did not have jurisdiction in this case because the COPA effectively exempted the transaction from federal review. Ms. Batts said that 19 states currently have COPA regulations, which can be challenging for federal enforcers given that COPAs can allow hospital industry consolidation outside the reach of federal antitrust laws.
The second case discussed by Ms. Batts was John Muir’s proposed acquisition of San Ramon Regional Medical Center in California. The parties abandoned the deal after the FTC challenged the transaction. Ms. Batts noted that even though this transaction was small, the parties didn’t have a Certificate of Need and the California State AG was also against the merger. Ms. Batts then discussed the proposed Novant Health – Community Health Systems deal in North Carolina, which is presently being litigated. The FTC based its challenge on allegedly high post-merger shares and concentration levels, but also notably on expected harmful effects on nurses and doctors. Ms. Oliver commented that it is interesting that the FTC is getting involved in local transactions that the state authority has not disputed, referencing the fact that the North Carolina attorney general’s office did not join the FTC’s lawsuit.
The final two topics covered in the session were merger effects on labor and the role of private equity (“PE”) in healthcare transactions. Ms. Rouse started the discussion by stating that the labor dimension is critical to the FTC's review of hospital mergers. The agency is looking at changes in quality and wages. Ms. Rouse shared that research and testimony support that wage increases slow down, and nurses and doctors are restricted in the care they can provide in hospitals after mergers. Ms. Rouse was asked whether parties should analyze harm at all worker levels; she responded that the relevant labor market is case- and fact-specific.
Regarding the role of PE in healthcare transactions, Ms. Batts stated that PE entities have a target on their back at the moment. She contrasted two views on PE’s role in healthcare. On the one hand, PE can bring needed capital. On the other hand, some studies have shown that PE firms flip healthcare facilities by focusing on short-term profits, lowering patient care quality, and cutting costs aggressively. Ms. Batts emphasized that concerns about PE making serial acquisitions should apply to hospitals acquiring local providers and physician practices. Mr. Andrew said that new merger guideline #8 specifically addresses roll-up acquisitions, and he referenced the FTC’s recent suit against US Anesthesia Partners and Welsh Carson. Ms. Oliver asked Ms. Rouse and Mr. Andrew what evidence PE firms should bring to the discussion to say that the story has two sides. Ms. Rouse said that PE firms should show studies countering the current narrative of PE in healthcare and showing successful examples from an antitrust standpoint. Mr. Andrew noted that PE firms should show evidence that runs counter to what the agencies have observed: higher prices for the same services.
To close the session, Ms. Oliver asked the panelists to identify key issues when evaluating proposed transactions. Mr. Zach emphasized the need to be aware of the theories of harm that the agencies are focused on. Ms. Rouse was clear that there is a general concern about reduced competition in healthcare, and she emphasized that the agencies will scrutinize all transactions that raise concerns. Ms. Batts shared that nascent competition will be a more significant issue moving forward. Similarly, Mr. Andrew emphasized that the harm of a merger can occur even if parties are potential entrants.
