On Wednesday, July 20, 2016, the U.S. Department of Justice (DOJ) filed two lawsuits in the U.S. District Court for the District of Columbia, one, Cause 1:16-cv-01494, seeking to stop the proposed merger between Aetna and Humana (valued at $37 billion) and the other, Cause 1:16-cv-01493, seeking to stop the acquisition of Cigna by Anthem (valued at $54 billion). Continue Reading U.S. DOJ sues to stop health plan mergers
Because the healthcare industry is heavily regulated and complex, most healthcare deals involve a sign-then-close structure; that is, they have a period of time between signing the agreement and the closing date. This built-in period after signing the purchase agreement gives the parties time to obtain necessary approvals or perform necessary pre-closing covenants. Continue Reading Unique Considerations in Healthcare M&A Part 3 – Closing/Post-Closing
As with any transaction, a healthcare deal typically starts with a Letter of Intent (“LOI”) or Term Sheet to outline the base agreements on the business deal. The LOI or Term Sheet should include not only the purchase price (or range), purchase price adjustments, payment terms, closing conditions, confidentiality, exclusivity, and other common items, but also the transaction structure – for example, asset sale, stock/membership interest sale, merger, joint venture, affiliation, etc. Continue Reading Unique Considerations in Healthcare M&A Part 2 – Negotiation/Drafting
The U.S. Court of Appeals for the 9th Circuit affirmed a lower court’s findings Feb. 10, 2015, that the acquisition by St. Luke’s Health System (“St. Luke’s”) of Saltzer Medical Group (“Saltzer”), a physician group consisting mostly of primary care physicians, violated Section 7 of the Clayton Act. This is the first case in which the Federal Trade Commission (“FTC”) litigated through trial a challenge to a physician acquisition. Continue Reading UPDATE: FTC victory creates challenge for physician acquisitions
Due diligence is often perceived as a mundane part of the mergers & acquisitions (M&A) process, but its importance in healthcare transactions is critical. Due diligence is one of the first steps of any transaction and involves a buyer undertaking an in-depth examination of the target to evaluate the business and uncover potential issues or liabilities. In the healthcare industry, diligence is especially important considering the heavy regulation of the industry, the unique areas of risk, and the significant liabilities that could be imposed upon a buyer if issues and liabilities are not identified before the transaction closes. Continue Reading Unique Considerations in Healthcare M&A Part 1 – Due Diligence
The American Health Lawyers Association (AHLA) Fundamentals of Health Law conference, Nov. 12-14 in Chicago, featured Husch Blackwell Partner Cori Turner as a speaker and key member of the planning committee.
The conference primarily focused on ensuring attendees gained an understanding of laws and regulations for the health law industry, including Stark and Anti-Kickback, False Claims Act, antitrust, tax and HIPPA regulations. Its goals also included increasing knowledge of the legal challenges faced by hospitals, physicians, long-term care providers and managed care organizations, as well as learning about the impact of the health reform law on the healthcare industry. Continue Reading Husch Blackwell’s Turner speaks at AHLA Fundamentals program
On April 16, in a win for Purdue Pharma, the maker of OxyContin, the FDA issued a decision approving updated labeling for Purdue’s reformulated, abuse-resistant OxyContin tablets. The decision places drug makers on notice that the FDA will not accept or approve any abbreviated new drug applications (generics) that rely upon the agency’s December 1995 approval of Purdue’s original OxyContin formulation.
The FDA’s decision was issued just as Purdue was set to lose its patent on the original formulation of OxyContin. Loss of this patent would have opened the opioid-painkiller market to competition from generic drug makers. But now, going forward, new applications for generic “copycat” forms of the drug must meet Purdue’s approved, abuse-resistant standard, without infringing upon Purdue’s patent for reformulated OxyContin, which lasts until 2025.
Concern over abuse of the well-known painkiller was central to the FDA’s decision. The agency explained, in a press release accompanying its decision: Purdue’s “labeling indicates that the [reformulated] product has physical and chemical properties that are expected to make abuse via injection difficult and to reduce abuse via the intranasal route (snorting).” The press release further stated that: The original formulation of OxyContin “was abused, often following manipulation intended to defeat its extended-release properties. Such manipulation causes the drug to be released more rapidly, which increases the risk of serious adverse events, including overdose and death.”
According to the New York Times, the FDA’s decision was pushed by some state attorneys general, as well as pain treatment experts, who argued that the release of generic versions of OxyContin would feed street demand for the narcotic. Critics, however, have argued that the decision will result in higher prices for OxyContin, as the reformulated drug will not face generic competition. Continue Reading FDA Bars Generic “Copycat” OxyContin: Will Efforts to Limit Abuse of the Painkiller Also Limit Competition?
The FTC recently provided yet another warning to healthcare organizations that they must take the time to analyze potential antitrust implications when considering an acquisition or consolidation. On August 6, the FTC and Nevada Attorney General announced the filing of a lawsuit and proposed consent decrees settling litigation filed against Renown Health, the largest hospital provider in Reno, Nevada. Here is a summary of the background facts:
- The lawsuit was based on Renown’s acquisition of the two largest cardiology practices in Reno, which gave the hospital 88% of the cardiology market.
- Renown required the cardiologists to sign non-compete agreements to prevent them from joining medical practices that competed with Renown.
- As a result of the acquisitions and non-compete provisions, Renown allegedly employs 88% of cardiologists in the Reno area.
- The antitrust agencies challenged Renown’s acquisitions and non-compete requirements on the basis they decreased competition and could raise prices for cardiology services.
The FTC consent degree requires Renown to suspend the non-compete provisions for 30 days while the consent decree is open for public comment. During the suspension, up to 10 cardiologists will be able to terminate their employment with Renown without breaching the non-compete provisions or incurring any other penalty. If the FTC approves the consent decree, the non-compete provisions will be suspended for an additional 30-day period. The suspensions will continue to be extended until six cardiologists have terminated their employment. In addition, the settlement requires Renown to provide notice of future cardiology-related acquisitions, implement an antitrust compliance program, and reimburse the attorney general’s fees and costs from the investigation.
Our Insight. Your Advantage. The Renown lawsuit is just the latest in the recent trend of enforcement actions brought against healthcare providers by federal regulators. The Renown matter is significant in that it signals regulators’ willingness to challenge physician practice acquisitions in addition to more commonly reviewed hospital mergers. In this regulatory climate, the antitrust implications of any type of provider consolidation should carefully be reviewed in advance of the transaction.
On June 25, 2012, the U.S. Supreme Court granted the Federal Trade Commission’s request for certiorari review in FTC v. Phoebe Putney Health System, Inc., a hospital merger case on appeal from the U.S. Eleventh Circuit Court of Appeals and the U.S. District Court for the Middle District of Georgia.
At issue in the case is the FTC’s challenge to a hospital merger that would give the acquiring health system 100% market share in its county and more than 90% market share of the multi-county region in rural southern Georgia. Applying the state action doctrine, both the trial court and the Eleventh Circuit held that the merger of two private hospitals, Phoebe Putney Memorial Hospital and Palmyra Park Hospital, was immune from antitrust laws even though all parties agreed that the merger created a monopoly. State action immunity applies when a policy that displaces competition is “clearly articulated” and “actively supervised” by the state. The doctrine can extend to private actors when they act pursuant to a clearly articulated state policy to displace competition, and they are actively supervised by the state. Clear articulation is found when a restraint of trade is a “foreseeable” consequence of the action taken by the state. Continue Reading The U.S. Supreme Court Grants Cert in FTC v. Phoebe Putney Health System, Inc. to Determine the Breadth of the State Action Antitrust Immunity Doctrine