FTC Eyes Crackdown on Pharma Mergers

The Federal Trade Commission announced this week that it is launching a broad review of drug-company mergers, with an eye to examining how such actions can harm competition in the biopharmaceutical industry. The Commission is forming an international working group that will include lead competition officials from Canada, the United Kingdom, and the European Commission, as well as the U.S. Department of Justice Antitrust Division and state attorneys general.¹

The goal of the initiative is to identify “concrete and actionable steps” to review and update how the Commission analyzes pharmaceutical mergers, as one way to address “skyrocketing drug prices” and concerns about anticompetitive conduct in the industry. Although the FTC and the Justice Department share oversight of industry mergers, the FTC has the lead related to the biopharmaceutical industry. The project was spurred by acting FTC chair Rebecca Kelly Slaughter, who has called for closer scrutiny of pharma competition as member of the commissioner for several years.

In response to industry claims that company mergers foster innovation, the FTC project will address the need to “refresh” current assessment of harm related to industry conduct and what types of remedies can best prevent conduct involving price fixing, reverse payments and other regulatory abuses. The Commission wants to consider what evidence is needed to challenge transactions and how to assess the scope of assets and characteristics of firms for successful divestiture requirements.

The initiative reflects the Biden administration’s concerns about anticompetitive business practices, beyond much-discussed challenges to market control by high-tech industry leaders. The FTC is currently evaluating AstraZeneca’s proposed $39 billion acquisition of Alexion Pharmaceuticals, and scrutiny of the proposal is likely to be more stringent as a result of the new initiative. In most larger mergers, the FTC requires the divestiture of certain products or company assets to maintain competition in select markets, but many Democrats support stronger action to prevent excessive industry consolidation. Industry innovation has been driven in recent years by large companies buying up multiple small biotech firms, moves that critics claim leads to plan closings and reduced work forces.

Slaughter recently indicated that the review may examine the impact of past pharma merger reviews by the FTC, with an eye to assessing whether errors were made. While the Commission seldom reverses earlier consolidation decisions, that possibility has raised industry concerns.

Note

1. https://www.ftc.gov/news-events/press-releases/2021/03/ftc-announces-multilateral-working-group-build-new-approach