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California Attorney General Advocates for Greater Antitrust Enforcement in Private Equity in Healthcare

 |  June 21, 2024

By: John Carroll & Jordan Grushkin (Sheppard Mullin)

On June 6, 2024, California Attorney General Rob Bonta announced that he led a coalition of eleven state attorneys general in submitting a comment letter in response to a request for information by federal agencies. The Federal Trade Commission, the U.S. Department of Justice, and the U.S. Department of Health and Human Services had issued this request on March 5, 2024, seeking input on the impact of private equity-driven consolidation in healthcare. On the same day, these agencies also hosted a public workshop to discuss the effects of private equity investment in the healthcare system.

The California-led, 30-page comment letter presents the perspectives of the state attorneys general on the negative effects of consolidation in healthcare markets, particularly transactions driven by private equity funds and other alternative asset managers. It highlights several concerns, including consolidation and vertical integration in healthcare due to private equity’s involvement.

The letter argues that the structure of private equity firms, which are managed by general partners and hold investments in portfolio companies, can harm consumers. It points out that private equity firms often load acquired companies with high debt burdens and fees, and their short-term investment focus prioritizes short-term gains over long-term stability.