Health Care in the COVID-19 World: Antitrust & Competition Considerations
To massively understate the obvious, the ongoing impact of COVID-19 on the health care industry has, is and will continue to present an unprecedented test of will, skill and capacity of the industry’s infrastructure – well into the foreseeable future. Virtually everyone working within the health care arena, or otherwise intersecting with it, is owed another massively understated thank you for each of their compassion, commitment and selflessness as this crisis has unfolded and is attacked 24/7.
While this is happening, business must be conducted nonetheless, and new ways of doing business in the “WFH” or otherwise remote world has brought on challenges implicit as a result of change. In addition, and mainly because of the nature of this new coronavirus itself, health care concerns are communicating with each other more regularly, both directly and indirectly, about the wide range of issues confronted in the effort to treat patients, test drug therapies, develop treatment regimes, conduct research to find a vaccine, etc.
In addition, business continues outside the COVID-19 arena, and though perhaps thwarted by that arena’s dominance, business transactions continue, and the need to make regulatory filings in connection with affiliations, mergers and acquisitions remains, albeit itself directly impacted, in terms of protocols, by COVID-19’s impact on how business is conducted.
These factors raise several important antitrust and competition-related issues that must be kept in mind when conducting business in the COVID-19 era; while these issues are not new, they have a more focused level of magnification in terms of the opportunity for anticompetitive behavior. While most likely not a complete list of antitrust and competition concerns, we suggest that the following highlighted things be kept in mind as health care industry operators work within the daily challenges the COVID-19 crisis presents.
Whether formally or informally, and whether directly or indirectly, health care industry operators are seeing more needs to share business information with each other as a result of the impact on all operations the COVID-19 crisis presents. The exchange of competitively sensitive information (“CSI”) in the course of industry collaborations has been and always will be an area in which to be careful, and the level of care required now is heightened because everyone communicating is doing so in a completely new environment. Generally, collaborative discussions relating to patient care are appropriate. However, discussions about prices and charges, dealings with payors, dealing with the issues present in supply chains for critical items like PPE and drugs, employee benefit and compensation issues and others – all faced as a result of the demands of delivering services to coronavirus patients – raises the specter of not only exchanging CSI but also of purposeful collusive and parallel behavior that may well be anticompetitive. Health care institutions must be careful – as always – with respect to the nature of the information they are sharing, and to avoid joint or collective decisions concerning financial matters and things generally not directly related to patient care.
The bottom line, as always, is to avoid exchanging CSI and other dialogues which could be perceived as or lead to things like price-fixing, group boycotts, customer/market allocations, rigging bids for purchases, refusals to deal and other outcomes that are clearly outside the proper confines of how competitors can collaborate with each other. Of particular concern should be communications that are conducted through associations and other industry groups, ad hoc or otherwise. Those discussions should not touch on competition-related issues, but, as always, can involve things like care and course of treatment best practices, how statutory enactments are being dealt with and what interpretations are being considered, etc., can occur in the normal course with the regular antitrust admonitions remaining in place.
Virologists, immunologists, epidemiologists, chemists, doctors, M.D.-Ph.D.s, pulmonologists…the list goes on – are all involved in the critical research activities brought on by COVID-19. These research activities are often cooperative and collaborative among and between various parties in health care, medicine, drug companies, chemical companies, etc.
Often overlooked in those situations is the National Cooperative Research and Production Act of 1993 (“NCRPA”), and its amendment via the Standards Development Organization Act of 2004 (“SDOA”). While more detail is beyond the scope of this alert, the former ought to be seriously considered – the NCRPA establishes procedures U.S. controlled and located entities to engage in joint research, development, production or other joint venture-like activities to make a voluntary filing with the U.S. Attorney General and the Federal Trade Commission. If that filing is made, and, for some reason, the work of the venture is later challenged under the Clayton Act, the plaintiff, if successful, is limited in its right to recover to its actual (and not treble) damages, interest and reasonable attorneys’ fees.
Helpful information on the NCRPA can be found at https://www.justice.gov/atr/page/file/1197736/download, for example, and, if any reader wishes to discuss this important reduction in potential antitrust liability and the role it plays in facilitating the type of innovation the NCRPA (and the SDOA) promote, we would be happy to do so.
Employee Non-Compete Clauses
Health care industry employers, like many others, have had to furlough employees as a result of the impact of COVID-19 on their operations. Some of those employees may be subject to non-compete obligations in employment contracts. If those furloughed employees are not going to return to work, there needs to be a serious discussion with your legal counsel as to the meaning and enforceability of that non-compete in the event the employee seeks to work elsewhere. Any further discussion here would not be appropriate, as no general statements can be made – each non-compete has its own peculiar language, and, interpretation and enforcement is a function of state law. What can be said, however, is the antitrust regulators have, in recent years, taken a closer look at non-compete clauses, and that magnifying glass is likely to be even more in play as re-employment activities run their course in the coronavirus world. If a furloughed employee is not going to return to your organization, and is subject to a non-compete, counsel should be consulted in the event the employee is discovered to being employed by an organization apparently prohibited by the clause, and a business-legal decision ought to be made as a result of that discussion.
Merger Review Issues
Government regulators have been as affected, if not moreso in some ways, than private businesses, by the coronavirus, in the sense that their ability to receive, review and act on regulatory filings and issue approvals and denials has been compromised. In the antitrust world, this means that Federal Trade Commission and Department of Justice lawyers working, for example, on merger review under the Hart-Scott-Rodino Premerger Notification Act (“HSR”) (and on administrative or judicial merger challenges – not discussed here) are doing so from home, just like the rest of us.
This has resulted in some retooling of protocols at the agencies with respect to HSR filings. Initially, the agencies announced that there would not be any review of “early termination requests” under HSR – early terminations were not going to be granted until an electronic filing mechanism could be worked out. In short, the agencies have had to move quickly to a different e-filing protocol. Currently, the agencies will consider early termination requests, but the new filing protocol is an interesting one. Parties needing to make an HSR filing are being told that they need to give the FTC notice, not more than four (4) days prior to the filing, that a filing will be made. During that four (4) day period, counsel will receive an upload link to which all parties much send their respective HSR Premerger Notification Forms and all attachments. Specific instructions currently in place are located here. And, as usual, assistance with filings, and answers to questions about HSR issues, is still available by email to HSRHelp@ftc.gov.
A frank assessment of the health care merger review arena in the COVID-19 world, the two lawyers who lead the “Mergers IV” section of the Federal Trade Commission’s Bureau of Competition, gave an exclusive interview to Law360, which can be found here; and it is may be an eye-opening read for many.
“Mergers IV” is the section within the FTC PNO that reviews transactions among and between hospitals, health care networks and doctors in the health care space. The interview is a candid assessment of some current thinking and realities on multiple substantive and procedural levels given current financial and capacity concerns brought on by the pandemic. Among other things, deals with potential antitrust concerns are taking longer to review, and that’s having an impact on deal terms. And, capacity issues are being considered in new ways, that is, is the pandemic highlighting the need for “bigger” players in the space, to assure more capacity in the consolidating health care world, or does consolidation highlight the possibility of capacity reductions in order to achieve economies of scale or otherwise?
These concerns and issues, and others, will persist and develop as the pandemic’s overall impact on the delivery of health care plays out, and providers, insurers and others deal with the every-changing focal points involving quality of care, delivery of care, finances, capacity and the overall impact of merger, acquisition, affiliation and similar activity on competition in relevant health care markets.
Faced with a completely different set of challenges, Thomas Paine said:
“THESE are the times that try men's souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands by it now, deserves the love and thanks of man and woman…we have this consolation with us, that the harder the conflict, the more glorious the triumph. What we obtain too cheap, we esteem too lightly: it is dearness only that gives every thing its value.”
– Thomas Paine, The Crisis
We are here to help. If you have antitrust and competition related concerns, addressed here or otherwise, please feel free to contact Michael A. Finio at Mike.Finio@saul.com, or via text or phone to (717) 460-3738 (cell) or by phone (717) 238-7671 (office, but it forwards to the WFH environment).