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Top Takeaways: Permissible Provider Collaborations During COVID-19 and Beyond

If you missed our latest webinar, enjoy the replay below and learn more as we provide highlights on competitor collaborations, avoiding violations in labor markets, provider M&A and partial acquisitions.


Competitor Collaborations
  • Antitrust compliance remains an important priority in the US. While companies have been engaged in finding creative solutions to COVID-19 challenges and regulators are expressing a willingness to be more flexible in interpreting and enforcing the law, the pandemic is not a carte blanche to engage in anti-competitive
  • Regulators are more prone to accept collaborations limited in scope to respond to COVID-19 and its aftermath, and arrangements undertaken at the behest of or in partnership with government actors. Companies should avoid high-risk conduct such as direct exchanges of competitively sensitive
  • Procompetitive agreements not relating to price, wages or market/product allocations remain possible. Companies should conduct an antitrust analysis before entering new collaborations and consider whether it would be helpful or advisable to engage with federal antitrust authorities or state governments to receive
Avoiding Antitrust Violations in Labor Markets
  • COVID-19 does not change antitrust rules for labor Antitrust laws apply to labor markets just as they do to markets for goods and services. Agreements with competing employers not to recruit, to set employee compensation or hours or to exchange confidential compensation information that reduces compensation can violate the antitrust laws. The Department of Justice (DOJ) will prosecute certain labor market antitrust violations criminally.
  • Establish guardrails to minimize antitrust risk in labor markets. Non-solicitation covenants that are part of broader collaborations should be tailored in scope to minimize antitrust Compensation benchmarking and salary surveys should be done in compliance with DOJ, FTC guidance.
Provider M&A
  • Antitrust planning for transactions should begin early in the deal. This allows the antitrust strategy to be developed and pursued based on specific facts. This planning should include due diligence regarding market conditions, the rationale or justification for pursing the transaction and the financial position of the Parties should also adopt protocols for document creation and communications.
  • Parties should consider transaction efficiencies, and how they benefit payors and patients. Clearly articulating the deal’s cost, access, quality and other benefits can help reduce deal delays from antitrust
Partial Acquisitions
  • Partial acquisitions potentially may help healthcare entities mitigate both the financial impact of the COVID-19 crisis and antitrust Acquiring a minority share in a rival can be less competitively restrictive than doing a full-scale merger or acquisition, because by law the parties must remain and act as separate and independent competitors.
  • But anticompetitive effects can result from a partial acquisition and the FTC/DOJ Horizontal Merger Guidelines identify three reasons why: the partial buyer may be able, through board seats or governance rights, to influence the target’s decisions; the buyer may have an incentive to compete less aggressively to protect its investment; and the buyer may have access to its rival’s competitively [...]

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The Latest: New DOJ Antitrust Division Policy Makes Compliance Programs More Critical than Ever

What Happened:

  • Last week, the Antitrust Division reported that it has changed its Justice Manual to state that it will consider antitrust compliance at the charging stage in criminal antitrust investigations, instead of waiting for plea negotiation or the sentencing stage.
  • Previously, the Antitrust Division had granted leniency only to the first whistleblower to come completely clean. Under the Antitrust Division’s policy reversal, this is no longer the only way to gain credit with the Antitrust Division, and the Antitrust Division will now consider if the Company has “robust” compliance programs when determining whether to bring charges.
  • With the announcement this past Thursday, the Antitrust Division published a guidance document that focuses on evaluating compliance programs in criminal antitrust investigations. This is the first time the Antitrust Division has published guidance on evaluating compliance programs in the context of criminal antitrust violations, and companies can now use this document to determine whether their compliance programs are in line with the Antitrust Division’s standards.
  • The Antitrust Division lists certain factors that Antitrust Division prosecutors should consider when evaluating the effectiveness of an antitrust compliance program. These are:
    1. The design and comprehensiveness of the program
    2. The culture of compliance within the company
    3. Responsibility for, and resources dedicated to, antitrust compliance
    4. Antitrust risk assessment techniques
    5. Compliance training and communication to employees
    6. Monitoring and auditing techniques, including continued review, evaluation and revision of the antitrust compliance program
    7. Reporting mechanisms
    8. Compliance incentives and discipline
    9. Remediation methods
  • In general, when analyzing a program, the Antitrust Division will ask whether the compliance program is well designed, whether it is being applied earnestly and in good faith, and whether it works.
  • Finally, the Antitrust Division also revised sections of its Manual on the processes for recommending indictments, plea agreements and selecting compliance monitors.

(more…)




THE LATEST: FTC Fixes Consummated Pharma Transaction Involving Pre-Phase 3 Product Because It Eliminated a “Nascent Threat”—Tacks on $100 Million Disgorgement Penalty

The Federal Trade Commission (FTC) challenged a consummated transaction using a monopolization theory to allege that the acquisition would eliminate “nascent” competition for therapeutic adrenocorticotropic hormones (ACTH) in the United States.

WHAT HAPPENED:
  • Questcor Pharmaceuticals, Inc.’s (Questcor) H.P. Acthar Gel (Acthar) is the only ACTH product sold in the US, is the standard of care for infantile spasms and is indicated for several other diseases.
  • In 2013, Questcor acquired the US rights to Synacthen Depot (Synacthen) from Novartis. Questcor was subsequently acquired by Mallinckrodt.
  • Synacthen is pharmacologically very similar to Acthar, as the active ingredient in both drugs is an ACTH molecule.
  • At the time of the acquisition by Questcor, Novartis’ Synacthen had been used safely and effectively for decades in Europe, Canada and other parts of the world to treat patients suffering from infantile spasms and other diseases. Synacthen had not yet begun US clinical trials.
  • The FTC alleged a monopolization theory—that Questcor had “extinguished a nascent competitive threat to its monopoly” by outbidding several other companies who were interested in bringing Synacthen to market in the US to compete with Questcor’s Acthar.
  • Then FTC Chairwoman Edith Ramirez (she has since resigned) noted that Questcor had a history of taking advantage of its monopoly, repeatedly raising the price of Acthar “from $40 per vial in 2001 to more than $34,000 per vial today—an 85,000 percent increase.”
  • The FTC settlement requires a $100 million monetary payment and that Mallinckrodt (Questcor was acquired by Mallinckrodt) license Synacthen for treating infantile spasms and nephrotic syndrome to an FTC approved licensee.
WHAT THIS MEANS:
  • In some circumstances, an action by a monopolist to block a nascent threat to its monopoly can violate the antitrust laws.
  • Typically, the FTC does not challenge pharmaceutical overlaps involving pharmaceuticals that have not yet entered Phase 3 clinical trials because there is still significant uncertainty that a product will ultimately come to market.
  • The FTC appears to have made an exception to its typical practice because Synacthen was anticipated to gain US approval easily and compete significantly with Acthar. Synacthen was approved outside the US for decades and was understood to be a safe and effective ACTH treatment.
  • The FTC may bring an action at any time under Section 7 to determine the legality of an acquisition. However, the FTC challenged this consummated transaction under a Section 2 theory of monopolization. The FTC has many tools to challenge actions under the antitrust laws.



The Importance of an Effective Compliance Program

On September 9, 2014, Brent Snyder, Deputy Assistant Attorney General of the U.S. Department of Justice Antitrust Division, provided prepared remarks on the subject of “Compliance is a Culture, Not Just a Policy,” before the International Chamber of Commerce/United States Council of International Business Joint Antitrust Compliance Workshop in New York City.  Snyder explained that an effective corporate compliance program is an important part of a company’s effort to prevent antitrust violations.

According to Snyder, compliance programs make good business and common sense.  He noted that compliance programs help prevent companies from committing crimes.  And, that even if a compliance program is not entirely successful, a partially successful compliance program may help a company qualify for leniency.  Snyder believes there is no one-size-fits-all compliance program. Instead, an effective compliance program should be designed to account for the markets a company operates in and the nature of a company’s business.  He also reviewed five things the Antitrust Division looks at when evaluating a company’s compliance program.

First, a company’s board of directors and senior executives must engage in and be fully supportive of the company’s compliance efforts.  This means that senior management must be fully knowledgeable about the company’s compliance efforts, including providing the necessary resources and having the appropriate personnel oversee the program.  Second, the entire company needs to be committed to executing the policy.   Companies show this by training all executives and managers, and most employees, especially the employees with pricing and sales responsibilities.  Third, the compliance policy should be proactive. To do so, companies should monitor and audit “risk activities.”  Fourth, a company should have an approach to individuals that break the antitrust laws, including being willing to discipline employees for any violations.  Finally, a company that uncovers criminal antitrust conduct should be equipped to prevent the conduct from happening again, which can mean making changes to its compliance program and being prepared to accept responsibility for that conduct.

Snyder also mentioned that having a compliance program may still benefit a company planning to plead guilty to an antitrust crime.  The examples he provided were companies with compliance policies possibly being able to avoid additional oversight by the court and the Division.  The Sentencing Guidelines require an effective compliance program.  If a company does not have one or can’t show it is updating its existing one, a company will most likely be on probation.  However, if a company can show that they adopted or strengthened an existing compliance program it may be able to avoid probation.  The Division is also considering possible ways to credit a company that proactively strengthens or adopts a compliance program after the commencement of an investigation.

In the end, however, Snyder was clear that the purpose of “having an effective compliance program is not so that the Division will cut you a break if your company commits a crime.”  Instead, the purpose of an effective compliance program, as described by Snyder, is to be a “good and responsible corporate citizen.”

 




Commission Holds Goldman Sachs Liable for Former Portfolio Company’s Antitrust Infringement

by Veronica Pinotti, Lionel Lesur, Martino SforzaNicolò di Castelnuovo

In its decision of 2 April 2014 in relation to the underground and submarine high voltage power cables cartel case (COMP/39610), the European Commission (Commission) held the parent companies of the producers involved liable, on the basis that they had exercised decisive influence over the producers. The fines levied by the Commission in this case totalled €301.6 million. One of the businesses found liable was Goldman Sachs, the former owner of Prysmian, which is one of the companies that allegedly participated in the cartel.

This case has important implications for private equity funds. It confirms that, in principle, the Commission does not view private equity funds differently to other businesses for the purpose of the application of the parental liability doctrine.

Read the full article

 




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