Industrial Organization Pharmaceuticals Public Policy Regulation

What is the FTC’s stance on pharmaceutical mergers?

The answer to this question likely will be shaped in part by a new multilateral working group that will include not only representatives from the U.S. (U.S. Department of Justice Antitrust Division, and Offices of State Attorneys General), but also Canada (Canadian Competition Bureau), Europe (the European Commission Directorate General for Competition) and the United Kingdom (U.K.’s Competition and Markets Authority). A press release from the FTC states:

This joint project taps expertise from competition authorities with whom the FTC cooperates frequently, as well as others with relevant experience, to ensure the most effective enforcement in these crucial markets. The goal of this initiative is to identify concrete and actionable steps to review and update the analysis of pharmaceutical mergers. This project will ensure that FTC investigations include fresh approaches that fully analyze and address the varied competitive concerns that these mergers and acquisitions raise.

“Given the high volume of pharmaceutical mergers in recent years, amid skyrocketing drug prices and ongoing concerns about anticompetitive conduct in the industry, it is imperative that we rethink our approach toward pharmaceutical merger review,” said FTC Acting Chair Rebecca Kelly Slaughter. “Working hand in hand with international and domestic enforcement partners, we intend to take an aggressive approach to tackling anticompetitive pharmaceutical mergers.”

Unlike many products which are sold into a competitive market, branded pharmaceuticals are often monopolies by design (in the short-run) due to their patent protection and period of exclusivity. The policy goal is generally to allow life science firms a return on their investment to incentivize innovation, but then subsequently allow for very competitive pricing from generics (or biosimilars) after the loss of exclusivity.

This international working group aims to answer the following questions:

  • How can current theories of harm be expanded and refreshed?
  • What is the full range of a pharmaceutical merger’s effects on innovation?
  • In merger review, how should we consider pharmaceutical conduct such as price fixing, reverse payments, and other regulatory abuses?
  • What evidence would be needed to challenge a transaction based on any new or expanded theories of harm?
  • What types of remedies would work in the cases to which those theories are applied?
  • What have we learned about the scope of assets and characteristics of firms that make successful divestiture buyers?

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