What You Need To Know
- In a recent episode of the Heart of Healthcare podcast, co-hosts Michael T. Esquivel and Halle Tecco, sat down with Federal Trade Commission Chair Lina Khan, who offered her perspective on the intersection of antitrust enforcement and the healthcare industry.
- Khan shared that the agency is focused on ensuring mergers don’t undermine competition, including in innovative markets such as pharmaceuticals.
- She talked about vertical integration, factors contributing to drug price inflation, and actions the Commission has taken to abate that.
- Khan also discussed the agency’s move to ban noncompete clauses, which is currently in legal limbo.
- She also discussed the financial burden of antitrust enforcement on regulatory agencies and called for a simpler process to reduce that burden.
In a recent episode of the Heart of Healthcare podcast, co-hosts Michael T. Esquivel and Halle Tecco, sat down with Federal Trade Commission (FTC) Chair Lina Khan, who offered her perspective on the intersection of antitrust enforcement and the healthcare industry. Healthcare is an important focus of the FTC, Khan said, due to increasing consolidation and the essential role it plays in people's lives. In the discussion, she touched on healthcare mergers, rising drug prices, and the challenges surrounding noncompete clauses.
The Changing Face of Healthcare Mergers
One of the standout topics was the shift in how healthcare companies exit. In the 1990s, a large percentage of venture-backed healthcare startups went public through public offerings. Today, almost 90% of their exits occur through mergers and acquisitions. Khan stated that changes in public offering regulations as well as past changes in antitrust enforcement, have led to this trend. She commented that there was a period of assumed benefits for vertical mergers—those between entities at different points in the supply chain—and, in her view, the FTC is now seeing the impact these deals can have on competition. Khan noted that the agency’s work is focused on ensuring mergers don’t undermine competition, including in innovative markets such as pharmaceuticals.
Vertical Integration in Healthcare: A Cause for Concern
Healthcare has seen both horizontal (across similar businesses) and vertical integration (across different levels of the supply chain), which can have significant consequences. Khan highlighted how vertically integrated middlemen in healthcare markets can have conflicts of interest. She cited the FTC’s case against Illumina’s acquisition of Grail as an example, where the commission argued that such a merger would distort competition and delay the release of life-saving cancer screening technologies.
Addressing Rising Drug Costs
A crucial issue raised was the increasing cost of prescription drugs, with Khan explaining that several practices contribute to this inflation. Khan mentioned tactics such as delaying the introduction of generics or biosimilars and leveraging patent strategies like “patent thicketing” and “evergreening.” Khan specifically mentioned the FTC’s challenge to Horizon’s acquisition of Amgen, which was centered on exclusionary bundling practices that the FTC believed may have harmed competition.
Non-Compete Clauses: A Healthcare Crisis
The FTC’s move to ban noncompete clauses was also discussed. Khan recounted stories from healthcare workers who were bound by noncompetes, which led to them leaving their communities or staying in unfit work environments. While the FTC’s rule banning noncompetes is currently in legal limbo due to ongoing litigation, Khan emphasized how critical this issue is, particularly in rural healthcare settings where such restrictions may, from her perspective, exacerbate worker shortages.
A Call for Change in Antitrust Laws
Khan concluded by discussing the financial burden of antitrust enforcement on regulatory agencies, which limits the number of cases the FTC can pursue. She argued that, in her view, Congress should simplify the process so that enforcing antitrust laws isn't prohibitively expensive, especially for state attorneys general offices with limited budgets.
Khan’s insights provide a deeper understanding of the complex dynamics shaping the healthcare industry and her perspective on the FTC’s role in maintaining fair competition. As healthcare continues to evolve, Khan emphasized that the FTC’s oversight of mergers, drug pricing, and non-compete clauses aims to maintain a competitive and fair market.
Listen to the episode here.
