January 22, 2026 • 25 mins
Life sciences M&A is picking up again, but today’s deals look nothing like they did two years ago.
In this episode, Darshan Kulkarni sits down with Stephanie Trunk, Partner at ArentFox Schiff, to unpack what’s really driving renewed deal activity and what buyers are still missing in diligence. From U.S. manufacturing incentives and drug pricing exposure to China risk, DOJ enforcement, compliance culture, and AI, this conversation goes beyond headlines and into deal reality.
If you are buying, selling, or advising life sciences companies, this episode is a must-listen.
Key Topics Discussed
- Why life sciences M&A slowed down and why it’s back
- The shift from mega-deals to asset-specific acquisitions
- Why U.S. manufacturing location now affects deal value
- Accelerated approvals and “Buy America” incentives
- Drug pricing risks buyers can no longer ignore
- ASP, inflation rebates, Medicaid rebate cap removal, and 340B pressure
- Political risk in drug pricing and government scrutiny
- China partnerships, data transfer rules, and biosecurity concerns
- Direct-to-patient models and new HIPAA exposure
- Using Sunshine Act and other public data in diligence
- Compliance programs, culture, and successor liability
- Why compliance issues still rarely kill deals
- The emerging role of AI in diligence and enforcement
- The IP diligence problem no one wants to solve
Why This Episode Matters
Life sciences deals are no longer just about science and revenue projections. Manufacturing geography, pricing exposure, compliance culture, data security, and enforcement risk now directly shape valuation and post-close outcomes.
Ignoring these issues does not make them go away. It just shifts the risk to the buyer.
Guest
Stephanie Trunk
Partner, ArentFox Schiff
Life Sciences | CMS | OIG | Reimbursement | Fraud & Abuse
Stephanie advises pharmaceutical, biotech, and device companies on regulatory risk, government pricing, and transaction diligence.
📧 stephanie.trunk@afslaw.com
🔗 ArentFox Schiff Life Sciences Blog
Host
Darshan Kulkarni
Founder, Kulkarni Law Firm
Host, DarshanTalks
📧 darshan@kulkarnilawfirm.com
🔗 LinkedIn: Darshan Kulkarni
Subscribe & Connect
If life sciences compliance, enforcement, or deals matter to your business, subscribe for more conversations like this.
Questions or ideas for future episodes? Reach out anytime.
www.kulkarnilawfirm.com
Listen
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_00 (00:00):
We might even have a conflict on how that makes it
recorded because Chinesegovernment is there.
We need to know.
Hey guys, welcome to anotherepisode of Caleb.
I'm here with the incredibleStephanie Trunk.
SPEAKER_02 (00:12):
I specialize my practices on all things life
science.
Just incredibly, incrediblybroad, if you think about it, in
a global economy.
Where we even have Chinesecompanies that have mod
manufacturing sites in theUnited States.
SPEAKER_00 (00:26):
I'm here with the incredible, the amazing, the not
at the beach, Stephanie Trunk.
And my name is DarshankelCarney.
But Stephanie, before we getstarted, you want to introduce
yourself?
SPEAKER_02 (00:37):
I'm Stephanie Trunk.
I'm a partner at Errant FoxSchiff outside of Washington,
D.C., not at the beach.
And I specialize my practice onall things life science from the
CMS and OIG lens.
So think reimbursement and fraudand abuse.
SPEAKER_00 (00:52):
We didn't see much in the context of MA for like a
year, year and a half.
Like things were happening, butat a very, very subdued rate.
And then things have changed.
I'm seeing an uptick right now.
What do you think changed?
SPEAKER_02 (01:04):
Me too, me too.
Um, same, same as you, Darshan.
And and I I couldn't really tellyou.
I think there's been, you know,when we had the change in
administration, or maybe leadingup to the change in
administration, a little bit ofnervousness about what that was
going to look like, especiallyin the life sciences realm, and
probably with with good reason,as we've seen some kind of
(01:25):
strange things coming on, andespecially around the area of
drug pricing and some of thesedeals that we see going on with
between the White House andmanufacturers.
But I think at some point intime, um, I think the business
had to go on.
And I think I think because ofthat and and the need to grow or
change.
But I am with you in the lastfew months, I've definitely seen
(01:48):
more MA shopping of assets,whether it be drugs or whole
companies or devices, what haveyou.
Um, so I definitely think it'spicking up again.
SPEAKER_00 (01:58):
I'm now seeing more strategic.
I'm gonna only buy this assetclass as opposed to your entire
company right now.
The other thing I'm seeing is amore strategic perspective,
which is um we're seeingcompanies going, you know what,
we are going to buy intocompanies based in the US
(02:18):
because we know that the Trumpadministration wants to see more
purchasing and more cons uh moresort of uh advocacy within the
US.
Yeah, exactly.
So so I I think that might bethe other element, which is you
buy up the companies that arealready manufacturing within the
US.
Is that uh resonating for you?
SPEAKER_02 (02:38):
Yeah, I mean that makes that makes a lot of sense.
SPEAKER_00 (02:40):
Yeah.
So do you think it's gonna landup being more of the smaller
companies that are being boughtout as opposed to the mega deals
we saw in the past, where youhave global supply chains?
SPEAKER_02 (02:52):
That's that's a another good question.
Um, I mean, I think we're alwaysgonna see smaller companies
being bought up, especially, youknow, if you're a single drug
company, for instance, and youhave a desirable product, you
can see that, and and you have amega company like a Pfizer that
needs to make make its you know,make its earnings.
(03:13):
We're also seeing some of thesemore strategic kind of
acquisitions like manufacturingfacilities in the United States
or maybe buying contract ummanufacturing organizations
rather than using the anunaffiliated C CMO.
SPEAKER_00 (03:28):
I think single drug companies may find themselves
selling now.
And the reason is um a lot ofthese initial phase companies
were depending on the theoriginal model.
The original model was we'regonna get a bunch of NIH funding
and we're gonna get a bunch ofoverhead and we're going to land
up um getting it ready for apurchase in a phase one, phase
(03:50):
two type of uh situation.
Instead, uh Trump administrationcoming in and saying, We're not
gonna give you those largeoverheads, we're going to push
back, we're gonna drop the costof drugs.
Um you're gonna see these thesecompanies that were aiming for
higher valuations suddenly go,I'm not sure I can get those
valuations anymore.
(04:10):
So it's it may be smarter topivot out and and sort of
refocus in a different way.
So I don't know where it's gonnawhere it's gonna land up, but I
think those previous theprevious model of having 50
companies all pursuing sort ofgetting to a phase ones, that
model may not survive in thesame way.
SPEAKER_02 (04:32):
Sometimes I think instead of focusing on just
start, you know, getting into aclinical trial and kind of
trying to bring a concept fromscratch, um, that we see the
let's purchase somethingestablished, right?
Um, and maybe in part that's dueto some of the uncertainty that
we see coming out of theadministration.
(04:53):
You know, we hear about yes, wewant accelerated drug approvals,
but then then we hear, no, weneed more manufacturing in the
United States.
We need, you know, it's it's alittle schizophrenic.
So I think I think because ofthat, that might be leading
companies to say the safer routemight be to buy something that
already exists rather than tryto make make something happen in
(05:15):
a pipeline.
SPEAKER_00 (05:16):
I think that's exactly right.
I think I'm also seeing you youmentioned a really interesting
thing which with the accelerateddrug approvals, because the
Trump administration just cameout and said if you manufacture
in the US, we're going to giveyou accelerated drug approval,
almost like the uh orphan drugstatus pathway.
And the first nine of them justgot awarded, which I think is
(05:37):
really interesting as well.
SPEAKER_02 (05:39):
So Yeah, and it'll be interesting to see how
accelerated it is, especiallygiven the shutdown.
SPEAKER_00 (05:46):
Um, for those people who don't know, we're recording
right now during theadministration shutdown.
You're you're seeing a lot offederal authorities, for
example, during the shutdown,they came out and said that the
CDC, a lot of people got firedat the CDC.
But that shouldn't have animpact, I would argue, on MA
transactions.
What are the big Trumpadministration factors that uh
(06:09):
companies that were doing MAtransactions two years ago
probably need to think aboutthat they weren't thinking about
two years ago?
SPEAKER_02 (06:17):
Yeah, that's a great question.
And I I think that that is areally good question.
And I I will say, yeah, likeconsidering where you're
manufacturing, you know, we weretalking about orange ring, but
like country of origin, right?
Um, the country of origin ofyour drug, what and not only
where it's where your API isfrom, right?
But also where are youphysically pounding the pill.
(06:38):
Uh, I think both matter morethan ever now.
And we've got kind of a littlebit of a divergence between what
customs kind of considerscountry of origin for a drug
versus what uh the VA mightconsider country of origin for a
drug for purposes of selling onthe federal supply schedule or
under the federal governmentcontract.
(06:59):
So you've got to really payattention and to both.
And then of course, it all tiesinto this emphasis, the
onshoring and the idea of buyAmerica, right?
And and if if you thinking aboutthe worth of that asset, if
you're able to say that eitherboth or want, you know, API and
the pill is finished in theUnited States, or uh at least
(07:22):
one is, and how that mightimpact your positioning in terms
of not only tariffs and tax, butyou know, like we just talked
about, whether that puts you inthe front of the line for
accelerated drug approval.
SPEAKER_01 (07:36):
Enjoying our content, we'd love to hear more.
Please like, comment, share, andfind more.
SPEAKER_02 (07:44):
This isn't really a new thing, but uh something
that's come up is a lot more forme in due diligence from a
pricing lens, is thinking aboutpricing, which, you know,
sometimes that used to be peoplewouldn't even pay attention to
government price reporting untilafter they bought the company.
But I have more, I've had moreand more questions about
(08:04):
government price reporting,whether that be average sales
price, and are we able to resetaverage sales price in some way?
And how could we do that?
Um, considering now we haveinflation rebates under
Medicare.
So thinking about that andthinking that through and its
impact financially on the asset.
And of course, the good oldMedicaid uh cap removal, we used
(08:25):
to have a cap on Medicaidrebates that actually went away
under a statute that was passedunder Trump 1.0, um, that has
become more and more of a focus.
And I think sometimes that's whyI see certain products up for
sale as well, because they'rekind of trapped with the,
they're no longer as profitableto the legacy company because of
(08:45):
the, you know, increasedMedicaid rebates, low 340B
price, and all those things.
So I'm seeing a lot more focuson pricing.
And then of course, justthinking about how it fits into
the bigger conversation aboutdrug pricing.
You know, is this gonna make meget on the, you know, it do I
get to a size or is it such adrug that I'm gonna be on the
radar of the administration,whether that be for direct
(09:08):
negotiation later down the roadunder the Inflation Reduction
Act for Medicare D, or just ingeneral?
Like, am I gonna be the 18thmanufacturer that gets a letter
from the Trump administrationthat says, hey, we think you
need to lower your prices?
What are you gonna do for us inorder to avoid tariffs or what
have you?
So it's been, you know, it'sbeen an interesting time.
And I think people are beingmore thoughtful uh in due
(09:31):
diligence, which I always thinkis is valuable.
So what about you?
What about you, Darshan?
Anything new from the FDA or theenforcement lens that people are
focusing more on now, given thechange of administration?
SPEAKER_00 (09:44):
I think it's it's been broader for me.
So I'll start with, for example,I just did a uh transaction with
a client, um, and they were theyhad a they had a pre-existing
partnership with a Chinesecompany.
And that raises all kinds offlags because you're going, the
um the Trump administration'snot happy with China, but they
also have come to realize thatthey need China quite a bit.
(10:06):
So, how do you, for example, uhdeal with the bulk data rule?
And how do you transfer data foradverse events to China because
you're gonna have to report thatand at the same time comply with
uh the data security rules thatgo along with it?
Um, for those people who don'tknow, there's this whole new
rule that's not coming from OCR,for example, not from uh the the
(10:30):
um Health and Human Services.
Instead, it's coming from theDepartment of Justice.
And they're saying that patientinformation is uh something that
the Trump administration cares alot about.
And whether you're talking aboutabout biometrics, you're talking
about adverse events, um, theyhave to be managed very, very
carefully.
And the reconciliation part ofit, you might even have a
(10:52):
conflict on how that informationgets recorded because the
Chinese government will say, weneed to know if our label needs
to be updated.
Um, so if you're doing atransaction globally, keep that
in mind.
The the US Biosecurity Act,they're looking now at how are
you going to partner with itfrom an IP perspective.
And that's right.
(11:12):
We don't really know how it'sgoing to play out because it's
still the first version of it.
SPEAKER_02 (11:16):
What it would do is basically not allow you to have
any touch to a Chinese companyanywhere like in the chain of
making a drug, right?
Yeah.
And that's incredibly broad, ifyou think about it, in a global
economy, where we even haveChinese companies that have
manufacturing sites in theUnited States.
SPEAKER_00 (11:35):
Exactly right.
I'm seeing small diagnosticscompanies and multi-like global,
multinational companies alldealing with uh
direct-to-patient stuff.
And they're going, how do wedirectly sell to the patients?
So if you have that structure inplace, how do you manage patient
information?
Because companies have alwayssaid, we don't want patient
(11:57):
information, we don't want to beinvolved, we don't want to be in
that business at all because wedon't want to be subject to
HIPAA.
And yet now with with theseengagements, there and there are
like a billion different waysthese things get done.
But um you you want this directrelationship with the patient.
So I think that's the futurewhere you are going to have that
(12:18):
direct relationship.
Um but how that gets managed isgonna become a whole new thing.
You you mentioned sourcing,which I think is gonna become a
um a really interesting piece.
Um, you actually said this inthe previous conversation before
we started recording, butconnecting it to the Sunshine
Act, because I know talking to alot of my DOJ friends, they're
(12:40):
looking at Sunshine Act andthey're going, we're gonna mine
publicly available data.
Why wouldn't we?
Um you you take that sameinformation, you tie it to uh
the um the controlled rule uhthe complete response letters,
CRLs, that are now publiclyavailable.
Um, that's gonna raise all kindsof questions, but that maybe you
(13:01):
should be doing research onbefore you purchase a company.
And that's gonna raise its ownsort of concerns.
Um, you you take promotionalcompliance just to add on to
that.
Um you look at the engagementwith influencers, and you're
seeing a lot of that happeningrecently.
Um, compliance there is gonnabecome a major concern.
And then there's obviously theGMP issues that go along with
(13:24):
it.
Who owns the product?
When is there a change in title?
Um who and I see this all thetime with manufacturers, they
kind of go, our distributors sayit's okay, except you actually
have the liability.
So you're people aren't doingthe analysis to go, um, who's
responsible for selling theproduct, who needs to be
(13:44):
registered in the differentstates.
And if that registration isn'tdone properly, who's actually
responsible?
Because states, my experience,tends to be they typically, and
that's not always the case, butthey typically aren't the most
aggressive ones.
The DOJ will do something, andthen states will say, we'll just
pile on because we don't have topay for the same costs.
Um, so that's been a reallyinteresting thing for me.
(14:06):
Um, as I continue.
Anything else that stood out foryou as as we continue?
SPEAKER_02 (14:12):
You brought up a good point of publicly available
data.
And I think it's reallyimportant in doing due diligence
that you're looking at that intandem with doing your diligence
review.
Yeah.
Right.
So if if you're if if you'regetting all these quality
reports, for instance, in a dataroom and they're saying
everything's great, but thenthey have you know a warning
(14:33):
letter, you you should be ableto map the fact that if they
have a warning letter to whatthey're what they've got in the
data room.
And I think this comes up a lotin my realm in sales and
marketing practices matching toSunshine Act reporting.
Because if they're doing allthese speaker programs and
they're paying all these doctorsto be speakers or their meals,
(14:55):
that better be tracking to theSunshine Act reporting.
And if it's not, there's somesort of disconnect and there's
got to be a a reason for that.
Um, and it could be a very biguh red flag on compliance,
right?
That could be hiding things ornot reporting things.
So I think that that's a that'sa you know a good safeguard is
(15:17):
to always be kind of goingthrough the data room, but also
be doing your own research onthings that are publicly
available at the governmental atthe governmental level and
otherwise.
And you know, getting back toSunshine, this is a really
interesting one, comes up a lotwith device due diligence.
Sometimes smaller companies getinto device, they were tech
companies, then they startedmaking like a monitor, right?
(15:39):
And it's used to read scans orsomething.
And then all of a sudden they'rethey're in a healthcare company
and they don't even realize thatthey have a reimbursable device
product and that has triggeredthe obligation to Sunshine Act
Report.
So that would be a good one.
Like it's you know, a goodexample of you're doing device
due diligence and there's nosunshine act reporting, and the
(16:00):
question becomes why.
Um, so yeah, definitely usingthose public sources is always a
good uh check on your own duediligence work.
SPEAKER_00 (16:11):
I think there's been an uptick in fraud and
compliance enforcement from theDOJ.
The DOJ is coming out and sayingthat we're we want you to have a
compliance program.
Yes.
And the truth is, I don't knowany companies that actually have
these compliance programs inplace.
However, if you don't, you'regonna land up having potential
(16:33):
successor liability.
And um, unless you go out thereand self-disclose, which not
many companies are doing, eventhough there's a really good
opportunity to do this rightnow, given that they're saying,
we'll we'll put outnon-prosecution on the table,
which, and you're not seeingenough of that.
We've seen a couple of thosenon-prosecution agreements that
came out of it, but I think thatthat would be a smart move to
(16:56):
consider in your back pocket asyou're doing the due diligence
uh transaction.
Then if you look at theemployment agreement, um, the
employment pilot program, wherethey said that we want to see
clawbacks.
And you're not seeing enough ofthose um clawback program
enforcement, which is if youhave executives who are not uh
(17:19):
being uh compliant, you need tohave their employment agreements
updated that says that for lackof compliance, we're going to
take your bonuses back.
You're just not seeing that.
Um, another element, I think, isbeing aware of the whistleblower
laws, uh, which the DOJ is nowsort of hardcore pushing because
(17:40):
we're gonna give whistleblowersthe money and they're going to
report on you.
So, what does that actuallymean?
And then there's the successorliability that um that comes
into play.
SPEAKER_02 (17:49):
We saw a little bit of a law in healthcare
enforcement.
I want to say like COVID time,right?
And maybe it's just because itwas COVID and everything was
strange then.
But it we did see a little bitof a law, but we there's
definitely renewed emphasis, andand it's you were a spot on.
It's interesting to see itcoming, not only from OIG now,
but from the like it's coming atus from all sides uh in terms of
(18:14):
front abuse enforcement andcompliance.
So that is still an idea.
SPEAKER_00 (18:19):
Follow our page on LinkedIn.
SPEAKER_02 (18:22):
I also think that's an under kind of reviewed area
during diligence.
Sometimes, you know, it's acheck the box.
Do we have the seven elements ofa compliance program?
Do we have policies?
But uh really trying to dig inand understand culturally if
you're buying the whole company,you know, is is there a culture
of compliance there?
(18:43):
And what does that look like?
You know, do people go to thecompliance officer?
Or are there hotline calls?
Are there at least logs ofcompliance concerns?
Is that are they really is itreally just a paper program or
are they really monitoring andauditing and and just kind of
figuring out, you know, who ifif if is it really just a sales
organization and they're kind ofrunning the show and the rest of
(19:05):
it's kind of behind the scenes,you know, if you're buying that
whole company, you're gonna beinheriting that.
Even even if you have a reallycompliant company, trying to
pull them in and integrate themcould be very difficult when you
they're kind of a little bitmore rogue.
And and you certainly see that,you know, I mentioned the device
space.
Sometimes you see that in thedevice space just because they
they grew up as an IT company.
(19:26):
Um, so if you're a traditionallife sciences company that's
been in the space for a longtime with a really robust
cultural client, and then all ofa sudden you're inherenting all
these sales guys who are viewingthemselves as techies, you you
are gonna have integrationproblems.
Not saying don't do the deal,just know that you're gonna have
integration.
SPEAKER_00 (19:44):
A lot of the deals I'm seeing.
Compliance is a nice to know,but they're not deal killers
yet, surprisingly.
People are still generallygoing, good to know.
We'll insure against it, we'lleven ask for indemnification.
It's not gonna kill the deal.
Is that still the perspectiveyou're seeing?
Or am I just dealing with thattype of client?
SPEAKER_02 (20:08):
No, no, it's still the perspective I'm seeing.
I don't think, I don't thinkwe've like as I mentioned
before, I'm starting to see moreand more focus on drug pricing,
which is because I think thatwas historically kind of an
under uh under under uh underreviewed area prior to buying a
company.
But I I would agree.
I I find that still it's prettycurs, it it can be pretty cursor
(20:30):
in terms of compliance duediligence.
And I I don't know why that is,given given the, as you so
rightly pointed out, thepotential exposure under
criminal statutes related tocompliance.
SPEAKER_00 (20:42):
The other thing that jumps out at me is the FDA
between Makari and uh betweenVinevrasad and everyone else.
I find it fascinating thatthey're saying that we're going
to be really, really focusing onclinical research and on
healthcare fraud and on uh umpromotional compliance.
(21:06):
And interestingly, they're usingAI.
And I'm not seeing anyone talkabout using AI in due diligence.
I I think it's a little early.
Um but but I'm curious on yourperspective, do you think AI has
a role in in due diligence as wecontinue?
SPEAKER_02 (21:22):
I at the very least, if you had a whole stack of
contracts and a data room, youcould use a tool to help you
summarize them, right?
Now, I always worry, I mean, I II sometimes use AI to to do that
or to compare testimony, yeah,right, like a depot to another
interview and and see what thedifferences are.
And sometimes it's good andsometimes it's not.
(21:44):
And I think that that's that'skind of where we are with AI
right now.
You know, sometimes it's a goodstarting point, but I also know
that it's wrong in certaininstances.
And so, I mean, I think you haveto be mindful of that when
you're doing diligence, that thesummary, you know, you're you're
kind of checking a little bit ofthe summary back to the
originating document.
But I do think there's a rolethere.
(22:04):
Um in and we we certainly areeventually gonna see it.
And I also think you're spot on.
I do think the government is, Ithink Doge used it.
Uh, and I think they are stillusing it.
And and I'll give you anexample.
If a drug was reimbursed underMedicare Part B, the Medicare
portion of CMS didn'tnecessarily know whether they
(22:27):
had a Medicaid rebate, but I seethat being mapped together.
Um, and that's that's a goodexample, just automatic mapping
of what's in the Medicaid systemdrug-wise to the FDA drug
listing and and automatedmessaging if there isn't a
match.
Like those, and then you know,uh it sends an automated
message, and maybe sometimesit's right and sometimes it's
(22:49):
wrong, or there's a reason, butyou're then the government gets
more information from yourresponse.
So the government is definitelyusing it.
I I imagine they'll start to useit more in enforcement.
Maybe they'll match something upto the Sunshine Act database or
or what have you, um, as as wego on in time.
And I think I think we will alsosee tools be used to help
(23:10):
summarize data in in data roomsrelated to due diligence.
SPEAKER_00 (23:15):
I'm gonna end this with a pet peeve of mine.
And I'm curious if you sharethis pet peeve or it's been a
non-factor for you for the mostpart, but um, whenever you do
the IP due diligence, right?
You always find the here's mylist of patents and copyrights
and blah, blah, blah.
And I always go, okay, how manyof those translate into anything
(23:36):
that I'm actually buying?
And you never get thattranslation, you never get that
mapping.
I own 50 patents, okay, and howmany of those impact the five
products I'm buying?
SPEAKER_02 (23:46):
Yeah.
SPEAKER_00 (23:47):
And I never see that.
And I'm just curious, is that ais that just a pet peeve, or
does everyone else sort of sharesome of those like you're like
I'm a beneficial?
SPEAKER_02 (24:00):
But I think that is a that is an I think an
excellent point.
And I think that is one, that isan area where it also has
relevance to like can you tiethe patent to the FDA approval
to the drug category andMedicaid, you know, like that's
another area where we could seeAI kind of coming into play.
(24:21):
And maybe that, maybe therewould be an AI tool that would
help get over your pet peeve andmap map up the patent to the
drugs.
SPEAKER_00 (24:29):
Or appropriately, and maybe I've my experience is
more that they don't want tobecause you might find out that
the IP doesn't match up theactual regulatory uh purchases,
and that's okay.
That's completely okay.
But then you go, I'm not payingyou for the IP because it has no
value for me.
Instead, what I'm gonna buy isthe exclusivity.
I'm gonna buy the market share.
(24:50):
Approval, the approval.
Yeah.
Those are that's the actualvalue I'm buying.
And knowing that is, I think,important in purchasing a
company.
But before we go, Stephanie, um,because we're almost at the
30-minute mark, how can peoplereach you?
SPEAKER_02 (25:06):
Via email, stephanie.trunk at afslall.com,
or you can Google me.
You I come right up.
Uh, and we do I do speak andwrite a lot on life science
topics on our blog, and you cansign up for alerts from our blog
uh from our website.
SPEAKER_00 (25:22):
Very cool.
And you, Darshan.
You can reach me at darshand-ar-s-h a n at Kilkarnelaw
firm.com.
I really should find a way ofmaking it shorter.
Uh, that's darshan atKilkarnelaw Firm.com.
Or you can find me, for example,on LinkedIn.
Um I think I'm the only DarshanKilcarney on there.
I could be wrong.
And and we welcome questions, wewelcome conversations, and um, I
(25:45):
look forward to hearing from youguys.
Thanks, everyone.
Call click or email.
We might even have a conflict on how that makes it
recorded because Chinesegovernment is there.
We need to know.
Hey guys, welcome to anotherepisode of Caleb.
I'm here with the incredibleStephanie Trunk.
SPEAKER_02 (00:12):
I specialize my practices on all things life
science.
Just incredibly, incrediblybroad, if you think about it, in
a global economy.
Where we even have Chinesecompanies that have mod
manufacturing sites in theUnited States.
SPEAKER_00 (00:26):
I'm here with the incredible, the amazing, the not
at the beach, Stephanie Trunk.
And my name is DarshankelCarney.
But Stephanie, before we getstarted, you want to introduce
yourself?
SPEAKER_02 (00:37):
I'm Stephanie Trunk.
I'm a partner at Errant FoxSchiff outside of Washington,
D.C., not at the beach.
And I specialize my practice onall things life science from the
CMS and OIG lens.
So think reimbursement and fraudand abuse.
SPEAKER_00 (00:52):
We didn't see much in the context of MA for like a
year, year and a half.
Like things were happening, butat a very, very subdued rate.
And then things have changed.
I'm seeing an uptick right now.
What do you think changed?
SPEAKER_02 (01:04):
Me too, me too.
Um, same, same as you, Darshan.
And and I I couldn't really tellyou.
I think there's been, you know,when we had the change in
administration, or maybe leadingup to the change in
administration, a little bit ofnervousness about what that was
going to look like, especiallyin the life sciences realm, and
probably with with good reason,as we've seen some kind of
(01:25):
strange things coming on, andespecially around the area of
drug pricing and some of thesedeals that we see going on with
between the White House andmanufacturers.
But I think at some point intime, um, I think the business
had to go on.
And I think I think because ofthat and and the need to grow or
change.
But I am with you in the lastfew months, I've definitely seen
(01:48):
more MA shopping of assets,whether it be drugs or whole
companies or devices, what haveyou.
Um, so I definitely think it'spicking up again.
SPEAKER_00 (01:58):
I'm now seeing more strategic.
I'm gonna only buy this assetclass as opposed to your entire
company right now.
The other thing I'm seeing is amore strategic perspective,
which is um we're seeingcompanies going, you know what,
we are going to buy intocompanies based in the US
(02:18):
because we know that the Trumpadministration wants to see more
purchasing and more cons uh moresort of uh advocacy within the
US.
Yeah, exactly.
So so I I think that might bethe other element, which is you
buy up the companies that arealready manufacturing within the
US.
Is that uh resonating for you?
SPEAKER_02 (02:38):
Yeah, I mean that makes that makes a lot of sense.
SPEAKER_00 (02:40):
Yeah.
So do you think it's gonna landup being more of the smaller
companies that are being boughtout as opposed to the mega deals
we saw in the past, where youhave global supply chains?
SPEAKER_02 (02:52):
That's that's a another good question.
Um, I mean, I think we're alwaysgonna see smaller companies
being bought up, especially, youknow, if you're a single drug
company, for instance, and youhave a desirable product, you
can see that, and and you have amega company like a Pfizer that
needs to make make its you know,make its earnings.
(03:13):
We're also seeing some of thesemore strategic kind of
acquisitions like manufacturingfacilities in the United States
or maybe buying contract ummanufacturing organizations
rather than using the anunaffiliated C CMO.
SPEAKER_00 (03:28):
I think single drug companies may find themselves
selling now.
And the reason is um a lot ofthese initial phase companies
were depending on the theoriginal model.
The original model was we'regonna get a bunch of NIH funding
and we're gonna get a bunch ofoverhead and we're going to land
up um getting it ready for apurchase in a phase one, phase
(03:50):
two type of uh situation.
Instead, uh Trump administrationcoming in and saying, We're not
gonna give you those largeoverheads, we're going to push
back, we're gonna drop the costof drugs.
Um you're gonna see these thesecompanies that were aiming for
higher valuations suddenly go,I'm not sure I can get those
valuations anymore.
(04:10):
So it's it may be smarter topivot out and and sort of
refocus in a different way.
So I don't know where it's gonnawhere it's gonna land up, but I
think those previous theprevious model of having 50
companies all pursuing sort ofgetting to a phase ones, that
model may not survive in thesame way.
SPEAKER_02 (04:32):
Sometimes I think instead of focusing on just
start, you know, getting into aclinical trial and kind of
trying to bring a concept fromscratch, um, that we see the
let's purchase somethingestablished, right?
Um, and maybe in part that's dueto some of the uncertainty that
we see coming out of theadministration.
(04:53):
You know, we hear about yes, wewant accelerated drug approvals,
but then then we hear, no, weneed more manufacturing in the
United States.
We need, you know, it's it's alittle schizophrenic.
So I think I think because ofthat, that might be leading
companies to say the safer routemight be to buy something that
already exists rather than tryto make make something happen in
(05:15):
a pipeline.
SPEAKER_00 (05:16):
I think that's exactly right.
I think I'm also seeing you youmentioned a really interesting
thing which with the accelerateddrug approvals, because the
Trump administration just cameout and said if you manufacture
in the US, we're going to giveyou accelerated drug approval,
almost like the uh orphan drugstatus pathway.
And the first nine of them justgot awarded, which I think is
(05:37):
really interesting as well.
SPEAKER_02 (05:39):
So Yeah, and it'll be interesting to see how
accelerated it is, especiallygiven the shutdown.
SPEAKER_00 (05:46):
Um, for those people who don't know, we're recording
right now during theadministration shutdown.
You're you're seeing a lot offederal authorities, for
example, during the shutdown,they came out and said that the
CDC, a lot of people got firedat the CDC.
But that shouldn't have animpact, I would argue, on MA
transactions.
What are the big Trumpadministration factors that uh
(06:09):
companies that were doing MAtransactions two years ago
probably need to think aboutthat they weren't thinking about
two years ago?
SPEAKER_02 (06:17):
Yeah, that's a great question.
And I I think that that is areally good question.
And I I will say, yeah, likeconsidering where you're
manufacturing, you know, we weretalking about orange ring, but
like country of origin, right?
Um, the country of origin ofyour drug, what and not only
where it's where your API isfrom, right?
But also where are youphysically pounding the pill.
(06:38):
Uh, I think both matter morethan ever now.
And we've got kind of a littlebit of a divergence between what
customs kind of considerscountry of origin for a drug
versus what uh the VA mightconsider country of origin for a
drug for purposes of selling onthe federal supply schedule or
under the federal governmentcontract.
(06:59):
So you've got to really payattention and to both.
And then of course, it all tiesinto this emphasis, the
onshoring and the idea of buyAmerica, right?
And and if if you thinking aboutthe worth of that asset, if
you're able to say that eitherboth or want, you know, API and
the pill is finished in theUnited States, or uh at least
(07:22):
one is, and how that mightimpact your positioning in terms
of not only tariffs and tax, butyou know, like we just talked
about, whether that puts you inthe front of the line for
accelerated drug approval.
SPEAKER_01 (07:36):
Enjoying our content, we'd love to hear more.
Please like, comment, share, andfind more.
SPEAKER_02 (07:44):
This isn't really a new thing, but uh something
that's come up is a lot more forme in due diligence from a
pricing lens, is thinking aboutpricing, which, you know,
sometimes that used to be peoplewouldn't even pay attention to
government price reporting untilafter they bought the company.
But I have more, I've had moreand more questions about
(08:04):
government price reporting,whether that be average sales
price, and are we able to resetaverage sales price in some way?
And how could we do that?
Um, considering now we haveinflation rebates under
Medicare.
So thinking about that andthinking that through and its
impact financially on the asset.
And of course, the good oldMedicaid uh cap removal, we used
(08:25):
to have a cap on Medicaidrebates that actually went away
under a statute that was passedunder Trump 1.0, um, that has
become more and more of a focus.
And I think sometimes that's whyI see certain products up for
sale as well, because they'rekind of trapped with the,
they're no longer as profitableto the legacy company because of
(08:45):
the, you know, increasedMedicaid rebates, low 340B
price, and all those things.
So I'm seeing a lot more focuson pricing.
And then of course, justthinking about how it fits into
the bigger conversation aboutdrug pricing.
You know, is this gonna make meget on the, you know, it do I
get to a size or is it such adrug that I'm gonna be on the
radar of the administration,whether that be for direct
(09:08):
negotiation later down the roadunder the Inflation Reduction
Act for Medicare D, or just ingeneral?
Like, am I gonna be the 18thmanufacturer that gets a letter
from the Trump administrationthat says, hey, we think you
need to lower your prices?
What are you gonna do for us inorder to avoid tariffs or what
have you?
So it's been, you know, it'sbeen an interesting time.
And I think people are beingmore thoughtful uh in due
(09:31):
diligence, which I always thinkis is valuable.
So what about you?
What about you, Darshan?
Anything new from the FDA or theenforcement lens that people are
focusing more on now, given thechange of administration?
SPEAKER_00 (09:44):
I think it's it's been broader for me.
So I'll start with, for example,I just did a uh transaction with
a client, um, and they were theyhad a they had a pre-existing
partnership with a Chinesecompany.
And that raises all kinds offlags because you're going, the
um the Trump administration'snot happy with China, but they
also have come to realize thatthey need China quite a bit.
(10:06):
So, how do you, for example, uhdeal with the bulk data rule?
And how do you transfer data foradverse events to China because
you're gonna have to report thatand at the same time comply with
uh the data security rules thatgo along with it?
Um, for those people who don'tknow, there's this whole new
rule that's not coming from OCR,for example, not from uh the the
(10:30):
um Health and Human Services.
Instead, it's coming from theDepartment of Justice.
And they're saying that patientinformation is uh something that
the Trump administration cares alot about.
And whether you're talking aboutabout biometrics, you're talking
about adverse events, um, theyhave to be managed very, very
carefully.
And the reconciliation part ofit, you might even have a
(10:52):
conflict on how that informationgets recorded because the
Chinese government will say, weneed to know if our label needs
to be updated.
Um, so if you're doing atransaction globally, keep that
in mind.
The the US Biosecurity Act,they're looking now at how are
you going to partner with itfrom an IP perspective.
And that's right.
(11:12):
We don't really know how it'sgoing to play out because it's
still the first version of it.
SPEAKER_02 (11:16):
What it would do is basically not allow you to have
any touch to a Chinese companyanywhere like in the chain of
making a drug, right?
Yeah.
And that's incredibly broad, ifyou think about it, in a global
economy, where we even haveChinese companies that have
manufacturing sites in theUnited States.
SPEAKER_00 (11:35):
Exactly right.
I'm seeing small diagnosticscompanies and multi-like global,
multinational companies alldealing with uh
direct-to-patient stuff.
And they're going, how do wedirectly sell to the patients?
So if you have that structure inplace, how do you manage patient
information?
Because companies have alwayssaid, we don't want patient
(11:57):
information, we don't want to beinvolved, we don't want to be in
that business at all because wedon't want to be subject to
HIPAA.
And yet now with with theseengagements, there and there are
like a billion different waysthese things get done.
But um you you want this directrelationship with the patient.
So I think that's the futurewhere you are going to have that
(12:18):
direct relationship.
Um but how that gets managed isgonna become a whole new thing.
You you mentioned sourcing,which I think is gonna become a
um a really interesting piece.
Um, you actually said this inthe previous conversation before
we started recording, butconnecting it to the Sunshine
Act, because I know talking to alot of my DOJ friends, they're
(12:40):
looking at Sunshine Act andthey're going, we're gonna mine
publicly available data.
Why wouldn't we?
Um you you take that sameinformation, you tie it to uh
the um the controlled rule uhthe complete response letters,
CRLs, that are now publiclyavailable.
Um, that's gonna raise all kindsof questions, but that maybe you
(13:01):
should be doing research onbefore you purchase a company.
And that's gonna raise its ownsort of concerns.
Um, you you take promotionalcompliance just to add on to
that.
Um you look at the engagementwith influencers, and you're
seeing a lot of that happeningrecently.
Um, compliance there is gonnabecome a major concern.
And then there's obviously theGMP issues that go along with
(13:24):
it.
Who owns the product?
When is there a change in title?
Um who and I see this all thetime with manufacturers, they
kind of go, our distributors sayit's okay, except you actually
have the liability.
So you're people aren't doingthe analysis to go, um, who's
responsible for selling theproduct, who needs to be
(13:44):
registered in the differentstates.
And if that registration isn'tdone properly, who's actually
responsible?
Because states, my experience,tends to be they typically, and
that's not always the case, butthey typically aren't the most
aggressive ones.
The DOJ will do something, andthen states will say, we'll just
pile on because we don't have topay for the same costs.
Um, so that's been a reallyinteresting thing for me.
(14:06):
Um, as I continue.
Anything else that stood out foryou as as we continue?
SPEAKER_02 (14:12):
You brought up a good point of publicly available
data.
And I think it's reallyimportant in doing due diligence
that you're looking at that intandem with doing your diligence
review.
Yeah.
Right.
So if if you're if if you'regetting all these quality
reports, for instance, in a dataroom and they're saying
everything's great, but thenthey have you know a warning
(14:33):
letter, you you should be ableto map the fact that if they
have a warning letter to whatthey're what they've got in the
data room.
And I think this comes up a lotin my realm in sales and
marketing practices matching toSunshine Act reporting.
Because if they're doing allthese speaker programs and
they're paying all these doctorsto be speakers or their meals,
(14:55):
that better be tracking to theSunshine Act reporting.
And if it's not, there's somesort of disconnect and there's
got to be a a reason for that.
Um, and it could be a very biguh red flag on compliance,
right?
That could be hiding things ornot reporting things.
So I think that that's a that'sa you know a good safeguard is
(15:17):
to always be kind of goingthrough the data room, but also
be doing your own research onthings that are publicly
available at the governmental atthe governmental level and
otherwise.
And you know, getting back toSunshine, this is a really
interesting one, comes up a lotwith device due diligence.
Sometimes smaller companies getinto device, they were tech
companies, then they startedmaking like a monitor, right?
(15:39):
And it's used to read scans orsomething.
And then all of a sudden they'rethey're in a healthcare company
and they don't even realize thatthey have a reimbursable device
product and that has triggeredthe obligation to Sunshine Act
Report.
So that would be a good one.
Like it's you know, a goodexample of you're doing device
due diligence and there's nosunshine act reporting, and the
(16:00):
question becomes why.
Um, so yeah, definitely usingthose public sources is always a
good uh check on your own duediligence work.
SPEAKER_00 (16:11):
I think there's been an uptick in fraud and
compliance enforcement from theDOJ.
The DOJ is coming out and sayingthat we're we want you to have a
compliance program.
Yes.
And the truth is, I don't knowany companies that actually have
these compliance programs inplace.
However, if you don't, you'regonna land up having potential
(16:33):
successor liability.
And um, unless you go out thereand self-disclose, which not
many companies are doing, eventhough there's a really good
opportunity to do this rightnow, given that they're saying,
we'll we'll put outnon-prosecution on the table,
which, and you're not seeingenough of that.
We've seen a couple of thosenon-prosecution agreements that
came out of it, but I think thatthat would be a smart move to
(16:56):
consider in your back pocket asyou're doing the due diligence
uh transaction.
Then if you look at theemployment agreement, um, the
employment pilot program, wherethey said that we want to see
clawbacks.
And you're not seeing enough ofthose um clawback program
enforcement, which is if youhave executives who are not uh
(17:19):
being uh compliant, you need tohave their employment agreements
updated that says that for lackof compliance, we're going to
take your bonuses back.
You're just not seeing that.
Um, another element, I think, isbeing aware of the whistleblower
laws, uh, which the DOJ is nowsort of hardcore pushing because
(17:40):
we're gonna give whistleblowersthe money and they're going to
report on you.
So, what does that actuallymean?
And then there's the successorliability that um that comes
into play.
SPEAKER_02 (17:49):
We saw a little bit of a law in healthcare
enforcement.
I want to say like COVID time,right?
And maybe it's just because itwas COVID and everything was
strange then.
But it we did see a little bitof a law, but we there's
definitely renewed emphasis, andand it's you were a spot on.
It's interesting to see itcoming, not only from OIG now,
but from the like it's coming atus from all sides uh in terms of
(18:14):
front abuse enforcement andcompliance.
So that is still an idea.
SPEAKER_00 (18:19):
Follow our page on LinkedIn.
SPEAKER_02 (18:22):
I also think that's an under kind of reviewed area
during diligence.
Sometimes, you know, it's acheck the box.
Do we have the seven elements ofa compliance program?
Do we have policies?
But uh really trying to dig inand understand culturally if
you're buying the whole company,you know, is is there a culture
of compliance there?
(18:43):
And what does that look like?
You know, do people go to thecompliance officer?
Or are there hotline calls?
Are there at least logs ofcompliance concerns?
Is that are they really is itreally just a paper program or
are they really monitoring andauditing and and just kind of
figuring out, you know, who ifif if is it really just a sales
organization and they're kind ofrunning the show and the rest of
(19:05):
it's kind of behind the scenes,you know, if you're buying that
whole company, you're gonna beinheriting that.
Even even if you have a reallycompliant company, trying to
pull them in and integrate themcould be very difficult when you
they're kind of a little bitmore rogue.
And and you certainly see that,you know, I mentioned the device
space.
Sometimes you see that in thedevice space just because they
they grew up as an IT company.
(19:26):
Um, so if you're a traditionallife sciences company that's
been in the space for a longtime with a really robust
cultural client, and then all ofa sudden you're inherenting all
these sales guys who are viewingthemselves as techies, you you
are gonna have integrationproblems.
Not saying don't do the deal,just know that you're gonna have
integration.
SPEAKER_00 (19:44):
A lot of the deals I'm seeing.
Compliance is a nice to know,but they're not deal killers
yet, surprisingly.
People are still generallygoing, good to know.
We'll insure against it, we'lleven ask for indemnification.
It's not gonna kill the deal.
Is that still the perspectiveyou're seeing?
Or am I just dealing with thattype of client?
SPEAKER_02 (20:08):
No, no, it's still the perspective I'm seeing.
I don't think, I don't thinkwe've like as I mentioned
before, I'm starting to see moreand more focus on drug pricing,
which is because I think thatwas historically kind of an
under uh under under uh underreviewed area prior to buying a
company.
But I I would agree.
I I find that still it's prettycurs, it it can be pretty cursor
(20:30):
in terms of compliance duediligence.
And I I don't know why that is,given given the, as you so
rightly pointed out, thepotential exposure under
criminal statutes related tocompliance.
SPEAKER_00 (20:42):
The other thing that jumps out at me is the FDA
between Makari and uh betweenVinevrasad and everyone else.
I find it fascinating thatthey're saying that we're going
to be really, really focusing onclinical research and on
healthcare fraud and on uh umpromotional compliance.
(21:06):
And interestingly, they're usingAI.
And I'm not seeing anyone talkabout using AI in due diligence.
I I think it's a little early.
Um but but I'm curious on yourperspective, do you think AI has
a role in in due diligence as wecontinue?
SPEAKER_02 (21:22):
I at the very least, if you had a whole stack of
contracts and a data room, youcould use a tool to help you
summarize them, right?
Now, I always worry, I mean, I II sometimes use AI to to do that
or to compare testimony, yeah,right, like a depot to another
interview and and see what thedifferences are.
And sometimes it's good andsometimes it's not.
(21:44):
And I think that that's that'skind of where we are with AI
right now.
You know, sometimes it's a goodstarting point, but I also know
that it's wrong in certaininstances.
And so, I mean, I think you haveto be mindful of that when
you're doing diligence, that thesummary, you know, you're you're
kind of checking a little bit ofthe summary back to the
originating document.
But I do think there's a rolethere.
(22:04):
Um in and we we certainly areeventually gonna see it.
And I also think you're spot on.
I do think the government is, Ithink Doge used it.
Uh, and I think they are stillusing it.
And and I'll give you anexample.
If a drug was reimbursed underMedicare Part B, the Medicare
portion of CMS didn'tnecessarily know whether they
(22:27):
had a Medicaid rebate, but I seethat being mapped together.
Um, and that's that's a goodexample, just automatic mapping
of what's in the Medicaid systemdrug-wise to the FDA drug
listing and and automatedmessaging if there isn't a
match.
Like those, and then you know,uh it sends an automated
message, and maybe sometimesit's right and sometimes it's
(22:49):
wrong, or there's a reason, butyou're then the government gets
more information from yourresponse.
So the government is definitelyusing it.
I I imagine they'll start to useit more in enforcement.
Maybe they'll match something upto the Sunshine Act database or
or what have you, um, as as wego on in time.
And I think I think we will alsosee tools be used to help
(23:10):
summarize data in in data roomsrelated to due diligence.
SPEAKER_00 (23:15):
I'm gonna end this with a pet peeve of mine.
And I'm curious if you sharethis pet peeve or it's been a
non-factor for you for the mostpart, but um, whenever you do
the IP due diligence, right?
You always find the here's mylist of patents and copyrights
and blah, blah, blah.
And I always go, okay, how manyof those translate into anything
(23:36):
that I'm actually buying?
And you never get thattranslation, you never get that
mapping.
I own 50 patents, okay, and howmany of those impact the five
products I'm buying?
SPEAKER_02 (23:46):
Yeah.
SPEAKER_00 (23:47):
And I never see that.
And I'm just curious, is that ais that just a pet peeve, or
does everyone else sort of sharesome of those like you're like
I'm a beneficial?
SPEAKER_02 (24:00):
But I think that is a that is an I think an
excellent point.
And I think that is one, that isan area where it also has
relevance to like can you tiethe patent to the FDA approval
to the drug category andMedicaid, you know, like that's
another area where we could seeAI kind of coming into play.
(24:21):
And maybe that, maybe therewould be an AI tool that would
help get over your pet peeve andmap map up the patent to the
drugs.
SPEAKER_00 (24:29):
Or appropriately, and maybe I've my experience is
more that they don't want tobecause you might find out that
the IP doesn't match up theactual regulatory uh purchases,
and that's okay.
That's completely okay.
But then you go, I'm not payingyou for the IP because it has no
value for me.
Instead, what I'm gonna buy isthe exclusivity.
I'm gonna buy the market share.
(24:50):
Approval, the approval.
Yeah.
Those are that's the actualvalue I'm buying.
And knowing that is, I think,important in purchasing a
company.
But before we go, Stephanie, um,because we're almost at the
30-minute mark, how can peoplereach you?
SPEAKER_02 (25:06):
Via email, stephanie.trunk at afslall.com,
or you can Google me.
You I come right up.
Uh, and we do I do speak andwrite a lot on life science
topics on our blog, and you cansign up for alerts from our blog
uh from our website.
SPEAKER_00 (25:22):
Very cool.
And you, Darshan.
You can reach me at darshand-ar-s-h a n at Kilkarnelaw
firm.com.
I really should find a way ofmaking it shorter.
Uh, that's darshan atKilkarnelaw Firm.com.
Or you can find me, for example,on LinkedIn.
Um I think I'm the only DarshanKilcarney on there.
I could be wrong.
And and we welcome questions, wewelcome conversations, and um, I
(25:45):
look forward to hearing from youguys.
Thanks, everyone.
Call click or email.
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