Instead of blaming private equity, the better solution is re-open the public markets, making it easier for companies to go public again, so that there are more public companies investing in healthcare (and the government will automatically have the transparency it so much desires). This would create more competition for healthcare investment dollars, and the best dollars would win – private equity in some cases, and public companies in others.
HCB News: How will Private Equity adapt investment strategies in healthcare given recent regulatory scrutiny?
BG: There are a lot of private equity funds that are focused entirely on healthcare, and we expect they will remain committed to investing in the healthcare sector.
AK: PE firms need to realize that there is a paradigm shift on how the antitrust and other laws are being used to impact social and economic change. Accordingly, PE firms cannot set their acquisition strategies using the traditional financial/investment lens; rather, they must be much more thoughtful in conducting an antitrust risk assessment of their portfolio holdings, which will help modulate those strategies to account for this new legal risk. Moreover, firms investing the healthcare space must be able to answer the fundamental question of how a proposed acquisition will benefit the customer/patient (i.e., will it help with access to services? Will it lead to new innovation?) If this question cannot be answered or otherwise substantiated in the affirmative (i.e., the deal will help patients), PE investments in healthcare will continue to face an uphill battle.
HCB News: Will the 2024 presidential election have an impact on the antitrust environment for PE investment in healthcare?
AK: I do not believe that a change in the White House will substantially impact the current antitrust scrutiny PE firms face in healthcare for a few reasons. First, while the Biden Administration implemented the new enforcement regime that PE firms are currently encountering, the concern about PE investments in healthcare has been developing for some time across multiple presidential administrations. Second, key enforcement agencies, such as the Federal Trade Commission, have been structured to have a certain amount of sustainability and stability irrespective of who is in the White House. For example, when President Biden entered office, the Commission had a majority Republican set of commissioners that would have been in office, based solely on their respective staggered terms, for a few years into President Biden’s term. Similarly, the Democrats could control the FTC for a few years even if Mr. Trump wins. Finally, the concern about private equity in healthcare is a bipartisan issue in Congress and particularly in the Senate, which I do not see subsiding anytime soon.
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