Speaker 1: Hello, and welcome to another episode of the Ad Thoughts Podcast.
Speaker 1: I'm Tracy Alloway and I'm Joe Whysenthal. Joe, I think
Speaker 1: it's fair to say that anti trust is having a moment.
Speaker 2: It's been having a moment for a while. It feels like,
Speaker 2: especially under this administration, there is this sort of renewed
Speaker 2: energy and interest. Of course, I think last month or
Speaker 2: two months ago we interviewed Jonathan Canter, Jonathan Canter from
Speaker 2: the DOJ, about it, but what our appetite and we
Speaker 2: want to do more.
Speaker 1: That's right, we do want to do more. And a
Speaker 1: lot of this renewed interest in anti trust and even
Speaker 1: controversy is down to Lena Khan, the chair of the
Speaker 1: Federal Trade Commission, the FTC, who's been going after everything
Speaker 1: from big tech to private equity investments in the healthcare industry.
Speaker 1: And I'm very happy to say that today we do,
Speaker 1: in fact have the perfect guest because we're going to
Speaker 1: be speaking to Lena Kahn. I'm very excited, me.
Speaker 2: Too, I'm psyched. I've been looking forward to this episode
Speaker 2: for a long time. I'm thrilled that it's finally here.
Speaker 1: Well, without further ado, uh, Lena, thank you, so much
Speaker 1: for coming on all thoughts.
Speaker 3: Thanks so much for having me.
Speaker 1: So I wanted to sort of dive in immediately into
Speaker 1: some of the most recent stuff you at the FTC
Speaker 1: have been doing. And you recently filed this monopolization claim
Speaker 1: against a PE backed company that's been buying anesthesiology businesses
Speaker 1: in Texas, and I have to say, reading the suit,
Speaker 1: there's some unsettling stuff in there, particularly the bit where
Speaker 1: there's a guy from the company, which is called US
Speaker 1: Anesthesia Partners, where they're buying another business and he's talking
Speaker 1: about how they can now raise their prices, and this
Speaker 1: executive goes chu ching, which you know, I'm guessing you
Speaker 1: don't want to have written down in a lawsuit about
Speaker 1: raising prices and roll up strategies.
Speaker 2: Well, when you when you're filing a suit, you must
Speaker 2: love seeing.
Speaker 1: But okay, here's my question. Why go after roll ups
Speaker 1: in healthcare specifically? And could you theoretically go after private
Speaker 1: equity roll ups anywhere?
Speaker 3: So, just to zoom out, the FTC overseas markets across
Speaker 3: the economy, but that includes healthcare, and healthcare markets are
Speaker 3: some of the most important ones that we oversee precisely
Speaker 3: because this is not a matter of buying toasters or
Speaker 3: vacuum cleaners. Right, this is essential healthcare. And in the
Speaker 3: United States, you know, we pay more for healthcare than
Speaker 3: any other country in the OECD, close to twice as average.
Speaker 3: We pay around a fifth of our GDP, and health
Speaker 3: outcomes are worse off. Right. We see higher rates of
Speaker 3: infant and maternal mortality, We see greater incidents of death
Speaker 3: from avoidable diseases, and so overall we see a whole
Speaker 3: set of problems that are stemming from a whole set
Speaker 3: of factors. The factor that's in our wheelhouse is looking
Speaker 3: at consolidation and a lack of competition, and so we
Speaker 3: enforce the nation's antitrust laws in hospital markets, in pharma markets,
Speaker 3: and we've been wanting to make sure that our enforcement
Speaker 3: efforts are really matching the realities of what we're seeing
Speaker 3: in today's markets. One of the trends that we've seen
Speaker 3: over the last decade is greater expansion of private equity
Speaker 3: in healthcare markets. At the FTC where business model agnostic,
Speaker 3: but we have been hearing from a whole lot of
Speaker 3: market participants, including healthcare workers, about the ways in which
Speaker 3: private equities incursion can result in detrimental outcomes. There was
Speaker 3: a study that found that, for example, when private equity
Speaker 3: bought out nursing homes, that you saw higher mortality rates. Right,
Speaker 3: So this is not even just about pricing, but it
Speaker 3: can really be life or death. So that's really overall
Speaker 3: what has stemmed our interest in taking a closer look
Speaker 3: at private equity and what ultimately led to the suit
Speaker 3: and the investigation.
Speaker 1: But what about in other industries? Is that something that
Speaker 1: you could theoretically also look at.
Speaker 3: Yeah, so we can look at businesses across the US
Speaker 3: economy and how they're structured and what they're particular business
Speaker 3: model is can vary. We've been particularly focused on healthcare markets,
Speaker 3: but especially after we filed this lawsuit, we've been hearing
Speaker 3: from market participants across sectors about additional areas where they
Speaker 3: believe that, you know, we should be scrutinizing, be it
Speaker 3: in healthcare or elsewhere.
Speaker 2: So it's not against the law to raise prices generally,
Speaker 2: and it might be elevised and it might make lawyers cringe,
Speaker 2: but it's also not against the law to right chi
Speaker 2: ching and an email. You know, the game is to
Speaker 2: make money. What is it about this case that makes
Speaker 2: it to your mind, anti competitive beyond just profitable raising money.
Speaker 3: Yeah, it's a good question. So this case is about
Speaker 3: a roll up scheme that was architected by the private
Speaker 3: equity firm Walsh Carson, and our lawsuit both names USAP
Speaker 3: as well as Walsh Carson because they were ultimately the
Speaker 3: core mastermind. And what happened was Welsh Carson recognized that
Speaker 3: the theesiology markets in Texas were quite fragmented and that
Speaker 3: created an opportunity for them to go in do a
Speaker 3: whole set of acquisitions. They ended up buying out some
Speaker 3: of the largest anesthesiology practices in Texas in ways that
Speaker 3: eliminated competition. Right, So you had a market that previously
Speaker 3: was fragmented where different anesthesiology providers were competing against one another,
Speaker 3: but ultimately, when they were a whole bunch of them
Speaker 3: put under the same ownership, that competition was eliminated. And
Speaker 3: we saw the effects of that pretty clearly because these
Speaker 3: entities were able to ultimately jack up prices, and so
Speaker 3: they did that in a whole set of cities across
Speaker 3: Texas for the anesthesiology practices that they weren't able to
Speaker 3: buy outright, they ended up entering into all sorts of
Speaker 3: agreements either not to enter each other's markets or to
Speaker 3: coordinate and ultimately hike prices. Nevertheless, so there's a whole
Speaker 3: set of anti competitive conduct that we alleged was going
Speaker 3: on here, and that's reflected and the whole set of
Speaker 3: antitrust claims that we bring both illegal acquisitions but monopolization
Speaker 3: as well as illegal market allocation schemes.
Speaker 1: One of the things I'm interested in, and we spoke
Speaker 1: a little bit to Jonathan Kanter about this, but how
Speaker 1: do you actually go about examining an industry and how
Speaker 1: did these things actually land on your radar? Because when
Speaker 1: we're doing odd thoughts, one of the things I think
Speaker 1: we've learned over the years is that even after we
Speaker 1: dive into a particular business for an hour, we often
Speaker 1: come away with more questions and this leads to, you know,
Speaker 1: five more hour long episodes about a single business. So
Speaker 1: what is your research process actually like? And then also,
Speaker 1: I know you said you were going to be reaching
Speaker 1: out to doctors to try to get more stories about
Speaker 1: the impact of PE on the healthcare industry, But what
Speaker 1: are the types of things that you're hearing?
Speaker 3: So we have phenomenal staff at the FTC who are deep,
Speaker 3: deep experts. I mean, these are the people who are
Speaker 3: really drilling in to the intricate mechanics of how various
Speaker 3: markets work. What are the contracting practices like if you're
Speaker 3: looking at pharma, you know, drilling down into what is
Speaker 3: the active ingredient, what are like the drugs and the pipeline.
Speaker 3: I mean, really just incredible mastery over just the nuts
Speaker 3: and bolts of all sorts of markets across the US,
Speaker 3: and so we really rely on their expertise. Beyond that,
Speaker 3: you know, we solicit information from a range of sources.
Speaker 3: One thing that I've been really focused on is making
Speaker 3: sure we're regularly engaging the broader public, and so we
Speaker 3: do these regular commission meetings where anybody can sign up
Speaker 3: and come talk to us. We've opened up a whole
Speaker 3: set of public dockets asking for information about certain types
Speaker 3: of contracting practices. We're doing an inquiry right now into
Speaker 3: pharmacy benefit managers the PBMs, which are these middlemen and
Speaker 3: the pharmaceutical supply chain. We've been getting a whole set
Speaker 3: of comments from independent pharmacies to patient advocates, and so
Speaker 3: we really want to make sure that you're sourcing broadly
Speaker 3: and making sure those information gathering channels are open, and
Speaker 3: really to make sure that our understanding of markets is
Speaker 3: really reflecting the reality. And this is actually how I
Speaker 3: got my start in anti trust as a business journalist
Speaker 3: and researcher, and one of my jobs was to really
Speaker 3: drill down and understand how various markets were faring, especially
Speaker 3: after decades of consolidation. And it was really that work
Speaker 3: and talking to market participants and understanding the reality and
Speaker 3: mechanics of their day to day and actually seeing how
Speaker 3: that departed from what some of the models in theories
Speaker 3: and anti trust were predicting. That really gave me a
Speaker 3: renewed appreciation for actually talking to the people in these
Speaker 3: markets to understand what's going on rather than just relying
Speaker 3: on our models and theories.
Speaker 2: One thing I really like about when reading through the
Speaker 2: complaint against US Anesthesia Partners, there's a really long conversation
Speaker 2: in there, just essentially about how the business model of
Speaker 2: anesthesia works and the relationship that the clinics have with
Speaker 2: the hospitals and how those arrangements are set. You know
Speaker 2: something though I'm curious about reading this is no one
Speaker 2: knows what the outcome is it seems straightforward. It seems
Speaker 2: like what we all think of as sort of classical
Speaker 2: anti competitive behavior. And the way you describe it is, yeah,
Speaker 2: they bought a bunch of regional clinics, got a big
Speaker 2: chunk of the market and raised prices, which I think
Speaker 2: if you ask people what anti competitive behavior looks like,
Speaker 2: it's something like that garnering a big and then saying
Speaker 2: chi ching and then saying chi ching. But the reason
Speaker 2: why I ask is that, you know, obviously, I think
Speaker 2: a lot of people associate your work with a sort
Speaker 2: of broader theory of anti trust related to corporate power
Speaker 2: and other ways that powerful corporate entities can affect employees
Speaker 2: or consumer or smaller businesses. Is it fair to say, though,
Speaker 2: that this is sort of retro old school anti trust
Speaker 2: is sort of a retro example of anti trust enforcement.
Speaker 3: I mean, everything we do is old school anti trust.
Speaker 1: Knowledge.
Speaker 2: There's some new thing, but it just feels it does
Speaker 2: not feel like some exotic or some sort of trendy
Speaker 2: legal theory. Yeah.
Speaker 3: So, look, the interesting thing about anti trust is that
Speaker 3: our foundational statutes are over one hundred years old, right.
Speaker 3: The Sherman Anti Trust Act was pass in eighteen ninety
Speaker 3: You then had the Clayton Act the FTC Act, which
Speaker 3: created the Federal Trade Commission in nineteen fourteen. And these
Speaker 3: laws set out terms like unfair methods of competition or
Speaker 3: restraints of trade, and at various points lawmakers had debates
Speaker 3: they said, should we define more specifically what that means?
Speaker 3: And they decided against it because they realized that as
Speaker 3: markets change, as technologies change, as business models change, firms
Speaker 3: are going to be endlessly innovative in how they monopolize
Speaker 3: right the tactics that they use. And so they left
Speaker 3: it open ended for enforcers to use their expertise to
Speaker 3: do deep investigations and make sure that those principles were
Speaker 3: being vindicated no matter whether you're in a smokestack industry
Speaker 3: or in the context of private equity, or in the
Speaker 3: context of some of these newer digital markets. And so
Speaker 3: those are really the principles that were animated by and
Speaker 3: that we look to vindicate throughout our work.
Speaker 2: Well, let me just ask as a follow up, I mean, presumably,
Speaker 2: as you said, you're collecting more comments, you're looking at
Speaker 2: more areas, et cetera. Is there anything in this particular
Speaker 2: case that was anti competitive but not in this sort
Speaker 2: of straightforward garnering market share and raising prices. In other words,
Speaker 2: are there other types of roll ups, perhaps in healthcare,
Speaker 2: perhaps other parts of other things that private equity might
Speaker 2: engage in where this case could serve as a warning,
Speaker 2: even if the strategy isn't about, oh, let's get seventy
Speaker 2: percent of the market and raise prices.
Speaker 3: So this is the first roll up case that the
Speaker 3: FTC has brought in several decades. And what I mean
Speaker 3: by that is that this case was about not just
Speaker 3: looking at each acquisition in a silo, but really looking
Speaker 3: at them in the aggregate, right, And that's really what
Speaker 3: we see with some of these roll up and serial
Speaker 3: acquisition strategies is that they may be composed of a
Speaker 3: whole set of individual transactions and acquisitions. Each one, when
Speaker 3: considered in a silo, may not seem problematic from a
Speaker 3: competition perspective. Right. Some of them may not even be
Speaker 3: reportable because they may be, you know, just a few
Speaker 3: tens of millions of dollars and not even trigger the
Speaker 3: heart's got Redino filing. And so you may have a series,
Speaker 3: each one of which is small and may seem benign.
Speaker 3: But when you zoom out and look in the aggregate.
Speaker 3: You have what you may have seen is a rollup
Speaker 3: of a market. And so this case should really put
Speaker 3: market participants on notice that the FTC is going to
Speaker 3: be looking at these deals in the aggregate. We're reserving
Speaker 3: that right for ourselves rather than just looking at each
Speaker 3: one in a silo.
Speaker 1: Well, on that note, when I think of roll up strategies,
Speaker 1: I think of them as kind of a foundational aspect
Speaker 1: of private XA. And I think it's fair to say
Speaker 1: that there are a lot of you know, pe decks
Speaker 1: that go around where they talk about multiple acquisitions and
Speaker 1: the ability that gives them in pricing power. So I
Speaker 1: guess it's unsurprising that you have seen some pushback and
Speaker 1: some lobbying recently. I think Politico just this week or
Speaker 1: last week ran a story calling you Wall Street's enemy
Speaker 1: number one, something to that effect. And we have seen
Speaker 1: businesses trying to use political partisanship to persuade some politicians
Speaker 1: to maybe repeal some of these laws or kind of
Speaker 1: push back against them. How does that impact what you do?
Speaker 1: And I guess how vulnerable are some of the directional
Speaker 1: shifts or changes that you've made at the FTC to
Speaker 1: this type of political pressure.
Speaker 3: Look embedded in the DNA of the FTC is when
Speaker 3: as an agency, we're being faithful to the statutes, right,
Speaker 3: the anti monopoly statutes, we're going to be pitted up
Speaker 3: against monopoly and very well healed interests, right. And these
Speaker 3: entities have power, they have resources, and they have a
Speaker 3: lot to lose if the antitrust laws are faithfully enforced,
Speaker 3: and so you know, that type of pushback is probably
Speaker 3: baked in if we're doing our job and being effective.
Speaker 3: The important thing, though, to recall, is that the business
Speaker 3: community is not a monolith, right, And we've been hearing
Speaker 3: equally from businesses, from entrepreneurs, from startups about the ways
Speaker 3: in which consolidation and anti competitive practices are locking them
Speaker 3: out of markets, are muscling them or squeezing them. We
Speaker 3: heard a lot from independent pharmacies, for example, about the
Speaker 3: ways in which vertical integration by PBMs may be leading
Speaker 3: to practices that is, you know, squeezing them. And especially
Speaker 3: in rural areas where you have some of these independent
Speaker 3: pharmacies shutter. That's essential healthcare that's no longer being provided
Speaker 3: to communities. The other week, I spoke to a conference
Speaker 3: of ERD doctors who shared the way in which private
Speaker 3: equity expansion into emergency medicine they believe is really harming
Speaker 3: not just the doctors, but ultimately the quality of patient care.
Speaker 3: And so these are real problems with real material effects
Speaker 3: on people. And so that's where making sure that we're
Speaker 3: hearing broadly and not just from you know, well healed
Speaker 3: companies that can afford lobbyists in DC is really critical,
Speaker 3: and make sure that we're keeping our eye on the
Speaker 3: prize and faithfully doing our jobs.
Speaker 2: I'm glad you brought up the potential harm to doctors
Speaker 2: and obviously the quality of care. There was an interesting
Speaker 2: article I read. I guess it was just yesterday in
Speaker 2: the American Prospect about the AMA considering a resolution for
Speaker 2: a federal ban on the corporate practice of medicine, and
Speaker 2: I guess, you know, I want to go back to
Speaker 2: what you said about I think was in the first
Speaker 2: question about listening to more people and opening up comments.
Speaker 2: Are you hearing the same thing the sort of frustration
Speaker 2: from doctors, And could the FTC in theory take action
Speaker 2: at some point in the future against an entity that
Speaker 2: wasn't necessarily aggressively raising prices but by dint of their
Speaker 2: having rolled up multiple clinics are mistreating workers or mistreating patients,
Speaker 2: like could that be enough?
Speaker 3: So the antitrust laws protect everybody. They protect patients and consumers,
Speaker 3: but they're also supposed to protect workers. And we've seen
Speaker 3: over the last decade, in particular, significant empirical research from
Speaker 3: labor economists finding that labor markets in the US are
Speaker 3: much more concentrated on average than previously believed, and that
Speaker 3: you have what's called, you know, monopsony power that can
Speaker 3: give employers outsized power over their workers when they're not
Speaker 3: checked adequately by competition. So that's a dimension of competition
Speaker 3: labor markets that we are very much looking at. The
Speaker 3: revised merger guidelines that we put out a draft of
Speaker 3: this past summer includes a particular guideline laying out how
Speaker 3: we will assess whether mergers may unlawfully lessen competition in
Speaker 3: labor markets. And one of the hospital mergers that we
Speaker 3: sued to block last year in Rhode Island included analysis
Speaker 3: about how the merger would be bad not just for
Speaker 3: patients but also for registered nurses. So it's becoming more
Speaker 3: and more key part of our analysis. Earlier this year
Speaker 3: In January, the FTC also brought a series of enforcement
Speaker 3: actions relating to the use of non compete clauses. So
Speaker 3: we brought one lawsuit against this company called Prudential Security.
Speaker 3: It's been employing security guards that were making close to
Speaker 3: minimum wage, and it had imposed on them these non
Speaker 3: compete clauses that we alleged were coercive and unfair methods
Speaker 3: of competition. We also brought a set of cases in
Speaker 3: the glass manufacturing industry. This is a part of the
Speaker 3: market that's quite concentrated. You basically have three big players,
Speaker 3: and we allege that their use of non competes had
Speaker 3: not even just been bad for workers, but it actually
Speaker 3: harmed competition because if you had an upstart who wanted
Speaker 3: to enter the market, they believed that was, you know,
Speaker 3: excess demand that they could come in and fill, they
Speaker 3: wouldn't be able to scale ultimately because the relevant talent
Speaker 3: pool was all locked up through these non competes. So
Speaker 3: that's becoming a greater part of our work. In January,
Speaker 3: we also proposed a rule that would eliminate non compete
Speaker 3: clauses in employment contracts for the vast majority of workers,
Speaker 3: with a couple of exceptions. And that again was stemming
Speaker 3: from a whole set of empirical research that found that
Speaker 3: non competes maybe depressing workers' wages to the tune of
Speaker 3: three hundred billion dollars a year annually. One thing that
Speaker 3: was very interesting to me was that, you know, you
Speaker 3: can imagine how the non compete may be bad for
Speaker 3: the worker that's directly covered by the non compete, but interestingly,
Speaker 3: they also have a negative effect even on workers who
Speaker 3: are not directly covered, which kind of makes sense, right,
Speaker 3: if there's less churn in the economy because workers are
Speaker 3: locked in by a non compete, that means there are
Speaker 3: fewer opportunities even for workers that are not covered by
Speaker 3: non compete. So we found harm to workers, we also
Speaker 3: found harm to competition and to innovation, and so this
Speaker 3: is another area of our work where we're looking at
Speaker 3: product markets, but we're also looking at labor markets.
Speaker 2: Tracy, that's interesting about the non competes. It's almost like
Speaker 2: the corollarya or flip side to what we've talked about recently,
Speaker 2: workers getting wages even if they're not in the union
Speaker 2: from wage gains. So what may affect just sort of
Speaker 2: one subset of workers has broader impact on it.
Speaker 1: Oh totally. Also, can I just say, ever since the
Speaker 1: twenty eighteen Jackson hole, I get really excited whenever anyone
Speaker 1: says monopsony, thanks.
Speaker 2: We need an air hornyye off, what Tracy?
Speaker 1: But I mean, just on this labor issue point, I mean,
Speaker 1: this is where we're sort of getting into the heart
Speaker 1: of the idea of hipster antitrust or sort of moving
Speaker 1: away from more traditional or classical interpretations of it. And
Speaker 1: you know, you're obviously the expert and correct me if
Speaker 1: I'm wrong, but my impression is that a lot of
Speaker 1: this is untested in courts, and as you just pointed
Speaker 1: out on the non compete clauses that you know, you
Speaker 1: could maybe fix some of this through new rule making,
Speaker 1: but otherwise you're going to have to pursue it through
Speaker 1: legal channels. So what exactly is the argument there, Like,
Speaker 1: how do you get the courts to incorporate this idea
Speaker 1: into existing law.
Speaker 3: So the idea that anti trust laws protect everybody, including workers,
Speaker 3: including competition in labor markets, is entirely accepted by the courts.
Speaker 3: There was a few years ago a Supreme Court decision
Speaker 3: and CAA v. Alston relating to student athletes, where the
Speaker 3: court you know, reaffirmed the idea that anti trust laws
Speaker 3: protect competition on the whole set of sides of the market.
Speaker 3: And just recently, the Justice Department prevailed in a case
Speaker 3: that they brought against publishers that were seeking to merge,
Speaker 3: and one of the arguments they advanced there was that
Speaker 3: that merger would have depressed the payments that are made
Speaker 3: to authors. And so they again were looking at you know,
Speaker 3: sides of the market other than end consumers. And you know,
Speaker 3: there again that that idea also prevailed. So you know,
Speaker 3: I believe we're you know, returning to faithful interpretations of
Speaker 3: the law which are accepted by courts. And on you know,
Speaker 3: the non compete side, for example, a lot of the
Speaker 3: comments that we've gotten are also from healthcare workers, and
Speaker 3: so something that we heard, for example, was that the
Speaker 3: use of non competes during the pandemic really impeded the
Speaker 3: ability of physicians to move. And this was a moment
Speaker 3: in time where you know, you had outbreaks at different
Speaker 3: cities and different regions, and so doctors and healthcare workers
Speaker 3: wanted to be mobile, right, they wanted to be able
Speaker 3: to go where COVID was really breaking out, and they
Speaker 3: found that they weren't able to move easily and some
Speaker 3: instances at all because of these non competes. And so
Speaker 3: you see again in a verry real material way, how
Speaker 3: this is not just about abstract debates with you know,
Speaker 3: various labels tacked on, but really just you know, real
Speaker 3: life impact I have.
Speaker 2: It's kind of a philosophical question that I've been thinking
Speaker 2: about a lot since we interviewed your sort of counterpart
Speaker 2: over it, the DOJ. You know, when I think about
Speaker 2: the broader economic agenda of the Biden administration, you don't,
Speaker 2: you know, And many commenters have talked about this is
Speaker 2: this sort of turn away against sort of neoliberalism, turnaway
Speaker 2: against the sort of assumption that the market is best.
Speaker 2: And so we have these big subsidies that are going
Speaker 2: towards the big domestic agendas, and some could even say
Speaker 2: we're picking winners and picking losers in a way. And yet,
Speaker 2: thinking about your anti trust work, you know, competition always
Speaker 2: seems like a good thing. It is like mom apple pie,
Speaker 2: the American flag and competition, like, no one's against competition.
Speaker 2: But I wonder like how it fits in this sort
Speaker 2: of economic moment in which policy seems to be moving
Speaker 2: in other realms away from the market knows best, and
Speaker 2: so you're sort of pursuing this idea that competition is
Speaker 2: this sort of per se good or its sort of
Speaker 2: a north start of pursue at a time when a
Speaker 2: lot of the economic policy making seems to be skeptical
Speaker 2: a lot of traditional ideas of what makes a good market.
Speaker 3: So, anti trust and competition policy is really about setting
Speaker 3: the rules of the market, right. Antitrust and the ftc
Speaker 3: act are really about distinguishing between fair and unfair methods
Speaker 3: of competition. Right, So, are you able to compete by
Speaker 3: burning down your competitors storefront? Right? Are you able to
Speaker 3: compete by engaging in certain types of exploitative or predatory
Speaker 3: practices or just buying out all of your rivals? No,
Speaker 3: I mean those are unlawful means of competing. There are
Speaker 3: other means of competing that are entirely lawful. Right, investing
Speaker 3: in your facilities, investing in your workers, developing real operational efficiencies.
Speaker 3: I mean, these are all mechanisms of competing that are
Speaker 3: fair game. And so that's really where anti trust fits in.
Speaker 3: I think one area where you do see some analogues
Speaker 3: between some of the you know, rethinking that's happening is
Speaker 3: where we are revisiting some of the core assumptions that
Speaker 3: started to be baked in in stay the late seventies
Speaker 3: and eighties and in antitrust. Those assumptions were really around
Speaker 3: the idea that monopoly power would generally be fleeting, because
Speaker 3: if a monopoly tried to exercise its power by say,
Speaker 3: raising prices, you would immediately see this flood of new
Speaker 3: competitors that would come in and discipline away that monopoly power.
Speaker 3: And there was this idea that, you know, there's always uncertainty,
Speaker 3: and so in the face of that uncertainty, the government
Speaker 3: should err on the side of being hands off, because
Speaker 3: government inaction that erroneously allowed monopoly power to flourish would
Speaker 3: be disciplined and fixed by the market, where as government
Speaker 3: errors on the side of enforcing the law would be
Speaker 3: much stickier and difficult to get new legislation passed or
Speaker 3: you know, court rulings overturn. And so that basic what
Speaker 3: it's known as kind of the error cost analysis, that like,
Speaker 3: when in doubt, government should stay out and not do anything,
Speaker 3: was kind of baked in. So the approach the agencies
Speaker 3: took to you know, a whole set of court decisions.
Speaker 3: And that's really but what's being revisited this idea, this
Speaker 3: whole set of you know, neo classical assumptions baked in
Speaker 3: that just say the market will self correct. And you know,
Speaker 3: the Biden administration, through the executive order, the President actually
Speaker 3: even said in his speech, you know, we've been living
Speaker 3: for forty years under this natural experiment, and the signs
Speaker 3: are all around us that this natural experiment has failed.
Speaker 3: We see too little competition in all these sectors. Americans
Speaker 3: are paying more, they're making less money. We're seeing innovation declined.
Speaker 3: They're all these material harms. And so that's where we
Speaker 3: need to reinvigorate. We need to dispel with this notion
Speaker 3: that the best n anti trust is no anti trust,
Speaker 3: and we actually need to faithfully enforce the laws.
Speaker 1: Joe, remind me to tell you about my first experience
Speaker 1: with American health care.
Speaker 2: Yeah, you can talk about it.
Speaker 1: But just on this point. You know, some of the
Speaker 1: criticism that we've seen, and I really I hate to
Speaker 1: keep quoting headlines from competing media outlets, but for instance,
Speaker 1: there was a Wall Street Journal op ed that had
Speaker 1: a very unsubtle headline of Lenacon blocks cancer cures, And
Speaker 1: I guess the question is, you know, the argument there
Speaker 1: is by making people think twice about investing in certain
Speaker 1: medical businesses, maybe you're cutting off a source of capital
Speaker 1: for a very capital intensive industry. It takes a lot
Speaker 1: lot of money to research new medicines, new treatments, build
Speaker 1: new facilities or whatever. So how do you balance the
Speaker 1: need to fund new and innovative medical treatments, in other words,
Speaker 1: the need to get money into this industry with the
Speaker 1: desire to ensure fair and competitive markets.
Speaker 3: So, look, we always consider every particular deal on its
Speaker 3: specific facts, on a case by case basis. I believe
Speaker 3: the merger that that op ed is referencing was actually
Speaker 3: voted out before I've even arrived at the FTC on
Speaker 3: a unanimous basis. So I think sometimes there's a desire
Speaker 3: to over attribute to me. But look, I think you know,
Speaker 3: in the pharma space, for example, we often hear arguments
Speaker 3: that are the only way for commercialization is to have,
Speaker 3: you know, the big pharma companies buy out the small
Speaker 3: pharma companies. And I think we've seen in practice that
Speaker 3: you want to be able to maintain more exit opportunities
Speaker 3: and so you know, even if you're talking about an
Speaker 3: existing monopolist buying out a new pipeline drug that could
Speaker 3: be a direct competitor, we think that's bad, right, And
Speaker 3: there's research showing that we've seen what are known as
Speaker 3: kill our acquisitions in the pharma space in particular, where
Speaker 3: you have these buyouts and ultimately the acquiring firm shuts
Speaker 3: down what was, you know, a pipeline drug or an
Speaker 3: existing area of R and D because it risked cannibalizing
Speaker 3: some of their existing drugs. The FTC also brought a
Speaker 3: lawsuit this summer against Amgen's acquisition of Horizon, and there
Speaker 3: we were really building on the fact that Amgen had
Speaker 3: a history of engaging in some of these exclusionary cross
Speaker 3: bundling tactics where they would use their existing portfolio of
Speaker 3: blockbuster drugs as anchors to secure more favorable treatment or
Speaker 3: placement by PBMs for some of their non blockbuster drugs,
Speaker 3: and that that could have a real exclusionary and anti
Speaker 3: competitive effect in ways that again is about ensuring that
Speaker 3: Americans have more affordable access to healthcare. And so, you know,
Speaker 3: the Horizon drugs that they were buyingstek to Pezza, these
Speaker 3: are addressing you know, special types of gout illnesses, special
Speaker 3: type of dioid illnesses. These are drugs that cost you know,
Speaker 3: anywhere from four hundred thousand to six hundred thousand dollars
Speaker 3: for a six month treatment. And so whether an acquisition
Speaker 3: is allowing a firm to fend off new rivals, fend
Speaker 3: off you know, generics or biosimilars from the market and
Speaker 3: keep prices high has a real material effect on people.
Speaker 3: And so that's why we take you know, enforcement in
Speaker 3: these areas so seriously.
Speaker 2: Just going back real quickly to the lawsuit that we
Speaker 2: started the conversation with the actions that you are alleging
Speaker 2: or engaged in by USAP, and they're backing pe from Walsh, Carson,
Speaker 2: Anderson and Stowe. Is it your belief or is it
Speaker 2: your sense that the basic playbook that they used is
Speaker 2: not confined to them, that there are many of these
Speaker 2: essentially same strategies that have been employed maybe in anesthesia
Speaker 2: or other realms within healthcare around the country that at
Speaker 2: some point maybe we're looking into.
Speaker 3: How you need Yeah, I mean, we wouldn't want to
Speaker 3: prejudge anything before you know, actually doing a real investigation,
Speaker 3: but I will say, both after this lawsuit, we've started
Speaker 3: hearing a lot from you know, healthcare workers and doctors
Speaker 3: and folks in healthcare who are pointing to other specialties
Speaker 3: in particular that they believe have similarly been rolled up,
Speaker 3: potentially unlawfully. We also, when we put out our draft
Speaker 3: merger guidelines, we got thousands and thousands of comments, a
Speaker 3: lot of those also from healthcare workers, again identifying areas
Speaker 3: where they believe we may have seen serial acquisitions or
Speaker 3: roll up. So, based on what we're hearing from the market,
Speaker 3: it certainly seems that this might not be an isolated strategy.
Speaker 1: Does the FTC have to win its suits to be effective,
Speaker 1: or you know, is the threat of legal action in
Speaker 1: and of itself a deterrent to monopolistic practices? Or if
Speaker 1: companies see the FTC losing in court, do they become
Speaker 1: more emboldened.
Speaker 3: So, look, we only bring lawsuits where we believe there's
Speaker 3: a law violation, and we bring lawsuits because we want
Speaker 3: to win. One area where I've been really pleased with
Speaker 3: our impact is deterrence. Right, as a law enforcer, you
Speaker 3: want to make sure that firms are not engaging in
Speaker 3: law violations in the first place. And one thing we've
Speaker 3: heard from you know, senior deal makers, senior anti trust lawyers,
Speaker 3: is that even a few years ago, when there were
Speaker 3: initial deal discussions, anti trust risk would not be among
Speaker 3: like the list of things that would initially get discussed, right,
Speaker 3: It might come up in the middle of the deal,
Speaker 3: or more often at the very end. And these senior
Speaker 3: deal makers are acknowledging that that's totally changed, Right, anti
Speaker 3: trust risk is now talked about at the very beginning.
Speaker 3: And as an enforcer, you want entities to be thinking
Speaker 3: about how do we not break the law? Right, that's
Speaker 3: good for enforcement, it's good for taxpayers, and so from
Speaker 3: a deterrence perspective, we're quite please and happy and think
Speaker 3: it's reflective of a functioning law enforcement system and of
Speaker 3: a rule of law system to make sure that entities
Speaker 3: are thinking about that type of risk initially.
Speaker 1: So no more putting chiching in company presentations.
Speaker 2: I guess, Billy, when you say that these antitrust concern
Speaker 2: is happening very early on in the conversation among dealmakers,
Speaker 2: where is that being aired? Is that something people are
Speaker 2: telling you, Is that something people are writing about? How
Speaker 2: do you actually see that?
Speaker 3: So we've had people tell us that directly. We've also seen,
Speaker 3: you know, senior heads of divisions of investment banks go
Speaker 3: on TV and you know, share that quite publicly.
Speaker 1: I have just one more question, and it's an extremely
Speaker 1: important one, and listeners of this podcast note that whenever
Speaker 1: there's an opportunity to bring chickens into the conversation, I
Speaker 1: will seize on it. But Joe and I heard that
Speaker 1: you might have a background in poultry.
Speaker 3: That's right. So I got my start in anti trust
Speaker 3: in part as a business journalist, and one of my
Speaker 3: first assignments was to look at the poultry market. The
Speaker 3: poultry market is an area where we've seen significant consolidation
Speaker 3: over the last few day decades, and so you have
Speaker 3: millions of consumers, you have thousands of farmers, but they're
Speaker 3: all just connected by a very small number of chicken
Speaker 3: processing companies. And you know, we've heard a lot over
Speaker 3: the years from chicken farmers about how this market may
Speaker 3: be enabling coercive and potentially anti competitive practices. We've also
Speaker 3: seen empirical research suggesting that consumers are paying more, chicken
Speaker 3: farmers are making less, and so it may be the
Speaker 3: companies in the middle that are just taking a bigger
Speaker 3: and bigger share.
Speaker 2: Tracy, if being a journalist stepping stone to this, then
Speaker 2: maybe one day that it could be this could be
Speaker 2: one of us.
Speaker 1: This is a very motivational need to do as well
Speaker 1: as Lena Kahn. Okay, well, Lena, that was amazing. Thank
Speaker 1: you so much for coming on odd lots and explaining
Speaker 1: the way you're thinking about anti trust at the moment.
Speaker 1: Thank you well, so nice to meet you both.
Speaker 3: You're kind of like legends and you know podcast World producers.
Speaker 1: Are you still recording? Joe? That was fun. Any conversation
Speaker 1: that includes both Monopsony and chickens I am a major
Speaker 1: fan of.
Speaker 2: That was a great conversation. There were so many interesting aspects.
Speaker 2: I mean, one thing that I really appreciate and I
Speaker 2: said it and it really comes throughing the complaint against
Speaker 2: USAP and it makes sense. I mean, lawyers aren't just
Speaker 2: going to bring a case without understanding the industry, but
Speaker 2: the sort of details about how these industries really operate
Speaker 2: and the different business models there. And I can only imagine,
Speaker 2: I don't know, the tip line that they must be
Speaker 2: getting flooded with at the FTC of frustrated doctors and
Speaker 2: frustrated healthcare workers as they watch, you know, themselves working
Speaker 2: for larger and larger corporate entities.
Speaker 1: Well, I kept thinking maybe FTC staffers would make really
Speaker 1: good all thoughts guests. I wonder if they would come
Speaker 1: on and talk about, you know, how they're thinking about
Speaker 1: specific industries.
Speaker 2: You know what I do think we should definitely get
Speaker 2: I mean a yes would be I think this corporate
Speaker 2: practice of medicine I mentioned there's this really good I
Speaker 2: mentioned it by Motagic at the American Prospect. You know,
Speaker 2: the AMA for years that one of their big things
Speaker 2: was sort of fighting against socialized medicine and things like that,
Speaker 2: and now they're complaining about corporatized medicine, And so what
Speaker 2: is it like to be a doctor in the year
Speaker 2: twenty twenty three versus I don't know, nineteen ninety three,
Speaker 2: as these large private equity firms and other large corporations
Speaker 2: are your bosses. Would sort of be a very interesting episode,
Speaker 2: I think.
Speaker 1: For us absolutely, and I'd be really interested in it
Speaker 1: because you know, I have a confession to make, which
Speaker 1: is I still don't understand how US healthcare works at all,
Speaker 1: Like it is just massively confusing. My plan is to
Speaker 1: never get sick, never have to go to a doctor
Speaker 1: or a hospital ever because I can't figure it out.
Speaker 2: Yeah, you literally can't. I So I recently this summer,
Speaker 2: I had a minor it was weird leg injury.
Speaker 1: It was fine, but.
Speaker 2: I went this hospital. It was fine, and they took
Speaker 2: care of it in a day. And then I got
Speaker 2: a bill. And the bill was actually not that big,
Speaker 2: but in my mind, the bill could have been anywhere
Speaker 2: from seventy five dollars copay to twenty thousand dollars and
Speaker 2: I would have had no idea at any point what
Speaker 2: I was going to pay. Just sort of a mirrorgly
Speaker 2: But how would I have any idea? And I just
Speaker 2: think that you just sort of enter in randomly to
Speaker 2: the US healthcare system and then it feels like you're
Speaker 2: rolling dick.
Speaker 1: Well, this is what I wanted to mention. So the
Speaker 1: first time I came to the States as a sort
Speaker 1: of working person was twenty twelve, I think, and I
Speaker 1: went to get a prescription for a medicine that I
Speaker 1: had gotten for free for more than ten years in
Speaker 1: the UK, and I left with an eight hundred dollars
Speaker 1: tab as an insured person, and it took months to
Speaker 1: sort it out with insurance. And I was so shocked
Speaker 1: that A this could even happen, and b that because
Speaker 1: of the way the US healthcare system worked, that it
Speaker 1: was suddenly compent on me to make a billion phone
Speaker 1: calls to both the insurance company and the doctor to
Speaker 1: argue about this fee. It just blew my mind.
Speaker 2: So one thing again, in this complaint against USAP, there's
Speaker 2: this whole conversation and it's sort of wild to think
Speaker 2: about that you could go into a hospital, the surgeon
Speaker 2: could be in your network and insured, and you don't
Speaker 2: even think, oh, but what if the anesthesiologist who you
Speaker 2: just think part of the package, right, you don't really
Speaker 2: think I'm getting don't competition?
Speaker 1: Well. The classic example is also if you get run
Speaker 1: over in the street and you're unconscious, you have no
Speaker 1: say in what hospital they're bringing you to.
Speaker 2: I mean, there's a lot to do with what a
Speaker 2: mess this is. So I do think that from a
Speaker 2: broader macro priorities of the United States standpoint, it is
Speaker 2: a belief that I have is we would be very
Speaker 2: good if we could just continue to pursue general exploitation
Speaker 2: and grift within the industry.
Speaker 1: No, I totally that would be.
Speaker 2: That would be a good goal, and if anti trust
Speaker 2: enforcement is one way to pursue that, then that's.
Speaker 1: Great, right. And this kind of gets to Lina's point
Speaker 1: about we've had decades at this point to illustrate that
Speaker 1: some aspects of the system aren't really working, and certainly
Speaker 1: my experience would tally with that. But anyway, we could
Speaker 1: go on and on about healthcare disasters for hours, but
Speaker 1: shall we leave it there.
Speaker 2: Let's leave it there, all right.
Speaker 1: This has been another episode of the Oddlots podcast. I'm
Speaker 1: Tracy Alloway. You can follow me at Tracy Alloway and.
Speaker 2: I'm joll Wisenthal. You can follow me at the Stalwart.
Speaker 2: Follow our guest Lina Kahn, She's at Lena Kahn FTC.
Speaker 2: Follow our producers Carman Rodriguez at Carmen Arman, dash Ol
Speaker 2: Bennett at Dashbot, and kel Brooks at Kelbrooks. And thank
Speaker 2: you to our producer Modes. It's on them. And for
Speaker 2: more Oddlogs content, go to Bloomberg dot com slash odd Logs.
Speaker 2: We have transcripts, a blog, and a newsletter that comes
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Speaker 1: And if you enjoy odd Lots, if you want us
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Speaker 1: Thanks for listening.