FTC Takes New Approach to Analyzing Pharmaceutical Mergers

The Federal Trade Commission (FTC) recently launched a working group to update its approach to analyzing the effects of pharmaceutical mergers and acquisitions. 

The joint project will adopt expertise from competition authorities and other organizations with relative experience to identify concrete and actionable steps to review and update the analysis of pharmaceutical mergers. 

The group will include the Canadian Competition Bureau, the European Commission Directorate General for Competition, the UK’s Competition and Markets Authority, the US Department of Justice Antitrust Division, and the Offices State of Attorneys General.

The project will ensure the most effective enforcement in the mergers and acquisitions market and ensure FTC investigators use new approaches that fully analyze and address the competitive concerns that pharmaceutical mergers and acquisitions may 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,” FTC acting chair Rebecca Kelly Slaughter, said in the announcement. 

“Working hand in hand with international and domestic enforcement partners, we intend to take an aggressive approach to tackling anti-competitive pharmaceutical mergers,” Slaughter continued. 

FTC noted a few questions that will be considered as part of the project, including:

·       How can current theories of harm be expanded and refreshed?

·       What are the full range of effects pharmaceutical mergers have on innovation?

·       How can the agency consider pharmaceutical conducts, such as price fixing, reverse payments, and other regulatory abuses?

Additionally, FTC will look at what evidence would be needed to challenge a transaction based on expanded theories of harm and the types of remedies that would work in the cases that these theories are applied. 

A July 2020 PwC insights analysis found that pharmaceutical merger and acquisition activity saw a notable decline in the first half of the year. But the potential for consolidation in specific sub-sectors remained high. 

For example, in April, Mylan and Pfizer delayed their major pharmaceutical merger due to the COVID-19 pandemic. 

Additionally, there were only two major deals in the first quarter of 2020, Qiagen and Thermo Fisher Scientific at $11.8 billion and Forty Seven and Gilead at a $5.0 billion value. And in Q2 of 2020, pharmaceutical deals were just $3.3 billion.

These numbers reflect a major decline from the second half of 2019, which saw four major deals during the last six months of the year. Researchers stated barriers global pharmaceutical and life sciences industry faced were due to economic, regulatory, political, and macro-economic factors. 

But just one month after the PwC analysis, merger and acquisition deals began to increase.

For example, Sanofi acquired biopharmaceutical company, Principia Biopharma, for $3.4 billion in August. The same week, Johnson & Johnson acquired Momenta Pharmaceuticals, a company that discovers novel therapies for immune-mediated diseases, for $6.5 billion. 

In November, Merck also signed a $2.75 billion deal with VelosBio to strengthen its oncology pipeline. And in December, AstraZeneca acquired Alexion in a $39 billion deal, while Eli Lilly & Company signed an $800 million deal to acquire Prevail Therapeutics.

In a PwC pharmaceutical and life sciences deals insight outlook, the company stated that it was optimistic that 2021 will be a return to normal for the pharmaceutical industry, with potential for deal activity across all transaction sizes in 2021. 

So far, one major deal in 2021 was Thermo Fisher acquiring Mesa Biotech for $450 million. 

But the company expects that new and larger players in the specialty pharmaceutical space, including Organon and Viatris, will likely focus their pharmaceutical deals on traditional therapeutic areas this year. This will create a large potential for further merger and acquisition activity.