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DOJ Complaint Names Private Equity Firm as Defendant in False Claims Act Case Targeting Health Care Portfolio Company

The U.S. Department of Justice’s recent decision to name a private equity firm as a defendant in a False Claims Act complaint against one of the firm’s portfolio companies, while uncommon, shines a spotlight on potential risk areas for private equity firms whose portfolio companies operate in industries with significant False Claims Act exposure like health care. In its complaint in intervention in United States ex rel. Medrano v. Diabetic Care Rx, LLC d/b/a Patient Care America et al. (S.D. Fla. No. 15-62617-civ), filed on February 16, 2018, DOJ alleges that compounding pharmacy Patient Care America (“PCA”) paid illegal kickbacks to several marketing firms in exchange for referrals for certain compound drugs that were reimbursed by Tricare, a federal health care program that provides health insurance for current military personnel, military retirees, and their dependents. The complaint further alleges that the pharmacy’s controlling stakeholder, private equity firm Riordan, Lewis & Haden, Inc. (“RLH”), managed and controlled PCA and participated in the charged misconduct. The government’s intervention to target both PCA and its private equity shareholder reflects a potential sea change in its approach to such cases.

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Amendments to HSR Pre-Merger Notification Requirements to Take Effect February 28, 2008


Time to Read: 1 minutes Practices: Private Equity

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The Federal Trade Commission has announced revised jurisdictional and filing fee thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. This is an annual adjustment to the size-of-transaction, size-of-persons, and filing fee thresholds based on changes in the gross national product. The revised thresholds apply to transactions closing on or after February 28, 2008.

The HSR Act and the related rules require the parties to a significant acquisition of voting securities, assets or non-corporate interests to file notification forms with the federal antitrust enforcement authorities and to wait for a defined period prior to completing the acquisition. Substantial civil penalties may be incurred if covered transactions are consummated without a filing or before the waiting period has expired or been terminated.

Although there are changes throughout the Act, including to the size-of-person test and the limitations contained in the exemptions for the acquisition of foreign assets and voting securities, the amendment affects private equity funds primarily as follows:

• Increased Size-of-Transaction Test – The size-of-transaction test will increase from $59.8 million to $63.1 million of voting securities, assets or non-corporate interests of the acquired person.
Revised Filing Fees – The filing fees paid by acquiring persons based upon the value of the voting securities, assets or non-corporate interests being acquired will be revised as follows:

                                    Value of Transaction                                             Fee

                $63.1-$126.2 million (formerly $59.8-$119.6 million)                  $45,000
                $126.2-$630.8 million (formerly $119.6-$597.9 million)             $125,000
                $630.8 million or more (formerly $597.9 million or more)           $280,000

Contact Information
To discuss the amendment and its impact on private equity funds, please call or email your regular Ropes & Gray attorney, or contact Cary Armistead, Tom Susman, or Jane Willis of our Antitrust Department.

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