President Biden recently issued an Executive Order on Promoting Competition in the American Economy (the “Executive Order”). Directed at addressing competition in numerous industries and markets, including the health care and labor markets, the Executive Order includes 72 initiatives directed at more than a dozen federal agencies that will focus on removing barriers to competition and reducing the adverse effects of corporate consolidation. While President Biden’s Executive Order does not yet carry the force of law and only “encourages” or “directs” federal agencies to make future adjustments to existing guidance, there are several takeaways for health care providers and employers to keep in mind. First and foremost, this Executive Order shows antitrust enforcement is a key priority for the Biden administration, which likely foreshadows increased antitrust enforcement from the Federal Trade Commission (“FTC”) and the Antitrust Division of the Department of Justice (“DOJ”).
Competition in Labor Markets – Expect More Criminal Enforcement
The Executive Order makes it clear that it is the policy of the Biden administration to promote a competitive market for workers, providing them freedom to switch jobs and negotiate higher wages. The Executive Order directs the FTC to ban or limit non-compete agreements and to ban unfair occupational licensing restrictions. Noting a sharp increase in the number of non-compete agreements in the private sector, and varying and increased occupational licensing requirements per state, the Biden administration argues these restrictions hinder the ability of workers to demand higher wages. From a practical perspective, any new guidance related to non-compete agreements will need to take into account various state laws on the topic because some states already ban or limit non-compete agreements in certain instances, especially in the context of employed physicians.
Previously, in October 2016 the DOJ and FTC issued its Antitrust Guidance for Human Resource Professionals. This guidance makes it clear that the DOJ and FTC will investigate and prosecute criminally those companies that enter into wage fixing or no-poach agreements. The enforcement priorities set forth in this prior guidance was previously evidenced in December 2020, when the DOJ criminally indicted a former owner of a physical therapist staffing company in the Dallas‑Fort Worth area for conspiring to fix wages. The Executive Order encourages the DOJ and FTC to revisit this guidance and consider whether the guidance needs to be revised. The Executive Order also encourages the FTC to use its statutory rulemaking authority to curtail the use of non-compete agreements and other agreements that may hinder worker mobility. And there is already tangible evidence of the Biden administration’s more aggressive approach in this area. The DOJ recently announced that a company focusing on dialysis and kidney care and its former CEO have been criminally indicted for entering into an no-poach agreement with another health care company. According to the DOJ, the two companies conspired to suppress competition for the services of certain employees by agreeing not to solicit each other’s senior-level employees.
With the issuance of the Executive Order, health care providers can expect there to be more scrutiny, more investigations and more criminal indictments for wage fixing or no-poaching agreements.
Competition in Health Care – Focus on Hospital Consolidation and Prescription Drugs
The Executive Order addresses competition in a number of key areas within the health care industry, noting that Americans are paying too much for prescription drugs and health care services.
One initiative seeks to address the increasing consolidation of hospitals and directs the DOJ and the FTC to review and revise their Merger Guidelines to ensure patients are not harmed by hospital and health system mergers. The Biden administration argues that the consolidation of hospitals, particularly in rural communities, has reduced patient access to affordable health care services, raised prices and forced many rural hospitals to close. Also, although not a new development, the Executive Order specifically raises the specter of retrospective review of previously consummated mergers.
In the pharmaceutical industry, the Executive Order directs the Department of Health & Human Services (“HHS”) and the Food and Drug Administration to address high prescription drug pricing in a number of ways, including increasing support for generic and biosimilar drugs, importing prescription drugs from Canada and banning “pay for delay” and similar agreements.
Finally, the Executive Order directs HHS to implement the No Surprises Act and existing hospital price transparency rules. These statutes are intended to reduce prices by prohibiting balance billing and making it easier for patients to shop for the best deal.
Practical Takeaways
- The issuance of the Executive Order combined with President Biden’s appointment of Lina Khan as Chair of the Federal Trade Commission, Xavier Becerra as Secretary of HHS, Jonathan Kanter as the Assistant Attorney General for the DOJ’s Antitrust Division and Tim Wu to the National Economic Council shows that President Biden will make antitrust enforcement, and specifically health care antitrust enforcement, a focal point of his administration. Chairwoman Khan and Mr. Wu are outspoken critics of existing antitrust enforcement policies, championing a more aggressive approach to antitrust enforcement that could upend how the FTC and DOJ analyze the health care industry. Similarly, in his previous role as Attorney General of California, Secretary Becerra brought antitrust claims against Sutter Health alleging anticompetitive conduct. Health systems and hospitals should expect a much more aggressive stance from antitrust enforcers over the next few years.
- The initiatives set forth in the Executive Order continue a trend of heightened antitrust scrutiny and criminal enforcement in health care and labor markets. Indeed, in the last couple of years several health care entities have been indicted for wage-fixing and no-poach agreements. With the Executive Order there is pressure from the top to continue investigating and prosecuting companies and individuals for wage-fixing and no-poach agreements in particular. Expect more resources, more investigations, and more indictments in the upcoming months and years.
- As additional guidance is released and rules are promulgated, it will be important to track how the Biden administration’s approach to non-compete enforcement intersects with state non‑compete laws.
- Health systems and hospitals contemplating mergers or acquisitions must be prepared for uncertainty and unpredictability in the antitrust merger review process. It is likely merging parties will face increased requests for additional information from the DOJ and FTC. In addition, it is likely the DOJ and FTC may look into non-traditional theories of harm. Parties will need to be flexible and expect the merger review process to be slower, more cumbersome and intrusive, and more unpredictable.
Hall Render’s Antitrust and Labor & Employment service lines will be monitoring the Biden administrations implementation of the Executive Order and will continue to provide updates as new developments are made public.
If you have any questions or would like additional information about this topic, please contact:
- William Berlin at (202) 370-9582 or wberlin@wp.hallrender.com;
- Michael Greer at (317) 977-1493 or mgreer@wp.hallrender.com;
- Dana Stutzman at (317) 977-1425 or dstutzman@wp.hallrender.com;
- John Bowen at (317) 429-3629 or jbowen@wp.hallrender.com;
- Claire Bailey at (317) 429-3608 or cbailey@wp.hallrender.com; or
- Your primary Hall Render contact.
Special thanks to Joseph Ho, law clerk, for his assistance with the publication of this article.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer an individual’s questions that may constitute legal advice.
