Lina Khan Is Sending a Message to the Private Equity Industry

Tracy Alloway (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:14)

And I'm Joe Weisenthal.

Tracy Alloway (0:15)

Joe, I think it's fair to say that antitrust is having a moment.

Joe Weisenthal (0:20)

It's been having a moment for a while. It feels like, especially under this administration, there is this sort of renewed energy and interest.

Of course, I think last month or two months ago, we interviewed a con from-

Tracy Alloway (0:32)

Jonathan Cantor.

Joe Weisenthal (0:33)

Jonathan Cantor from the DOJ about it, but it whet our appetite, and we want to do more.

Tracy Alloway (0:37)

That's right, we do want to do more. And a lot of this renewed interest in antitrust and even controversy is down to Lina Khan, the chair of the Federal Trade Commission, the FTC, who's been going after everything from big tech to private equity investments in the healthcare industry.

And I am very happy to say that today, we do in fact have the perfect guest because we're going to be speaking to Lina Khan. I'm very excited.

Joe Weisenthal (1:02)

Me too, I'm psyched. I've been looking forward to this episode for a long time. I'm thrilled that it's finally here.

Tracy Alloway (1:07)

Well, without further ado, Lina, thank you so much for coming on Odd Lots.

Lina Khan (1:11)

Thanks so much for having me.

Tracy Alloway (1:12)

So I wanted to sort of dive in immediately into some of the most recent stuff you at the FTC have been doing. And you recently filed this monopolization claim against a PE-backed company that's been buying anesthesiology businesses in Texas. And I have to say, reading the suit, there's some unsettling stuff in there, particularly the bit where there's a guy from the company, which is called US Anesthesia Partners, where they're buying another business and he's talking about how they can now raise their prices.

And this executive goes cha-ching, which I'm guessing you don't want to have written down in a lawsuit about raising prices and roll-up strategies.

Joe Weisenthal (1:54)

But when you're filing a suit, you must love seeing stuff like that.

Tracy Alloway (1:58)

But okay, here's my question. Why go after roll-ups in healthcare specifically?

And could you theoretically go after private equity roll-ups anywhere?

Lina Khan (2:07)

So just to zoom out, the FTC oversees markets across the economy, but that includes healthcare. And healthcare markets are some of the most important ones that we oversee precisely because this is not a matter of buying toasters or vacuum cleaners, right? This is essential healthcare.

And in the United States, you know, we pay more for healthcare than any other country in the OECD. Close to twice as average, we pay around a fifth of our GDP, and health outcomes are worse off, right? We see higher rates of infant and maternal mortality. We see greater incidence of death from avoidable diseases. And so overall, we see a whole set of problems that are stemming from a whole set of factors.

The factor that's in our wheelhouse is looking at consolidation and a lack of competition. And so we enforce the nation's antitrust laws in hospital markets, in pharma markets, and we've been wanting to make sure that our enforcement efforts are really matching the realities of what we're seeing in today's markets. One of the trends that we've seen over the last decade is greater expansion of private equity in healthcare markets. At the FTC, we're business model agnostic, but we have been hearing from a whole lot of market participants, including healthcare workers, about the ways in which private equities incursion can result in detrimental outcomes.

There was a study that found that, for example, when private equity bought out nursing homes, that you saw higher mortality rates, right? So this is not even just about pricing, but it can really be life or death. So that's really overall what has stemmed our interest in taking a closer look at private equity and what ultimately led to the suit and the investigation.

Tracy Alloway (3:48)

But what about in other industries? Is that something that you could theoretically also look at?

Lina Khan (3:53)

Yeah, so we can look at businesses across the US economy and how they're structured and what their particular business model is can vary. We've been particularly focused on health care markets, but especially after we filed this lawsuit, we've been hearing from market participants across sectors about additional areas where they believe that we should be scrutinizing, be it in health care or elsewhere.

Joe Weisenthal (4:17)

So it's not against the law to raise prices generally, and it might be ill-avised and it might make lawyers cringe, but it's also not against the law to write cha-ching in an email. The game is to make money.