Corporate Medicine 2.0 — Special Purpose AcquisitionCompanies in the United States

By Nishant Uppal and Zirui Song, published in NEJM, 10 April 2024

Acquisitions of U.S. health care entities by private equity firms have come under scrutiny. But the back end of corporate acquisitions — the exit strategy — has remained largely ignored, despite arguably being more important in the long run. Private equity firms typically sell acquired entities to another private company within 3 to 7 years. Increasingly, however, a different corporate exit strategy, going public, has emerged in health care. Going public has typically involved listing shares of the acquired entity on a stock exchange. But a new approach — which entails establishing so-called special purpose acquisition companies (SPACs) — is increasingly being used to enable private health care companies to be publicly listed. This strategy could have implications for providers, patients, and policymakers.

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SPACs represent a new phase in the corporatization of medicine. Private equity acquisitions have been linked to increases in prices, utilization, and adverse clinical events.3,4 By enabling more health care entities, including those owned by private equity firms, to go public, SPACs may facilitate for-profit ownership. Beyond provider markets, the emergence of SPACs in the pharmaceutical, health technology, and digital health sectors could also concentrate market power and increase prices for employers, insurers, and patients. According to a survey conducted by Deloitte, venture capital and private equity investors expect SPACs to increase consolidation and vertical integration in the health care industry. SPACs may enable health systems, insurers, and life-sciences companies to expand merger and acquisition activities.

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DGL comments: according to WHO, current per capita health care expenditures in US dollars were (in 2021) $45 pa for low income countries, $157 for lower middle income countries, $575 for upper middle income countries and $3,695 for high income countries. It is $12,000 for the USA.