[Ip-health] WSJ: FTC Prepares to Take Tougher Stance on Pharmaceutical Mergers

Thiru Balasubramaniam thiru at keionline.org
Tue Mar 16 23:22:31 PDT 2021


FTC Prepares to Take Tougher Stance on Pharmaceutical Mergers

Acting chairwoman Rebecca Kelly Slaughter favors new approach to analyzing
how drug-company deals affect competition

By Brent Kendall and Jared S. Hopkins
Updated March 16, 2021 7:10 pm ET

WASHINGTON—The Federal Trade Commission is preparing to take a harder line
on drug-company mergers, announcing plans Tuesday to overhaul its process
for reviewing deals that could harm competition in the pharmaceutical

The initiative, spurred by the FTC’s acting Democratic chairwoman, Rebecca
Kelly Slaughter, signals what could be a tougher road ahead for the
industry during the Biden administration. It also highlights a growing
Democratic push for stronger antitrust enforcement across the economy—and
not just the tech sector, where a handful of companies have attracted
bipartisan concern.

“We intend to take an aggressive approach to tackling anticompetitive
pharmaceutical mergers,” Ms. Slaughter said.

“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,” she said.

The industry’s biggest trade group, the Pharmaceutical Research and
Manufacturers of America, said mergers and acquisitions “help facilitate
the transfer of knowledge and expertise required to push the envelope of
scientific discovery.”

“Placing different standards and applying more stringent requirements on
any one industry, particularly the industry leading efforts to end the
current pandemic, risk undermining the unique environment in the United
States that values innovation and market competition,” the group said.

Commissioner Noah Phillips, a Republican, said that he welcomed “efforts to
assess competitive concerns that pharmaceutical mergers raise” but that
merger enforcement “should be rooted in a viable theory of harm to
competition and supported by evidence.”

The FTC initiative, which will include outside domestic and international
antitrust officials, will take a broader look at how pharmaceutical deals
affect the marketplace. Other participants include the Justice Department’s
antitrust division, state attorneys general and competition officials from
Canada, the U.K. and Europe.

During a telephone press conference, Ms. Slaughter said the commission
would re-examine its conclusions from past pharma merger reviews to
determine if it made obvious mistakes. The commission rarely takes action
against mergers after the fact, but she noted that the FTC does have the
power to do so.

Ms. Slaughter, a commissioner since 2018, was designated the acting head of
the FTC by President Biden after he took office in January. She is in the
running to be named the permanent chair of the five-member body, but the
administration has yet to announce its plans.

Once the commission gets two Senate-confirmed nominees, Democrats will hold
a 3-2 advantage, giving them room to attempt more-aggressive legal
arguments against proposed drug-industry deals.

Consolidation has been a key pharmaceutical industry trend for years as
companies look for new therapies and sources for growth. There were more
than 900 pharmaceutical deals valued at about $800 billion between 2016 and
2020, according to a market-research firm, EvaluatePharma.

A lot of innovation in drug development happens inside small biotechnology
firms that are later acquired by bigger companies. While large drugmakers
do fund internal research and development, they also acquire companies and
assets to help keep pipelines filled with potential medicines to help
offset revenue declines or patent expirations.

The 13 largest pharmaceutical companies netted one-third of the 444 drugs
approved by the Food and Drug Administration from 2010 to 2020, while about
180 other companies shared the remaining approvals, said Bernard Munos, a
senior fellow at the Milken Institute.

The dealmaking typically leads to cost cuts from smaller workforces and
plants closures.

The biggest pending pharmaceutical deal is AstraZeneca PLC’s $39 billion
acquisition of Boston-based Alexion Pharmaceuticals Inc., announced in
December. It is slated to close in the third quarter of this year.

The FTC shares antitrust authority with the Justice Department, but
pharmaceutical deals fall within its jurisdiction.

Democrats and Republicans alike at the FTC have been aligned on several
issues relating to pharmaceutical competition. In one major bipartisan
effort, the commission has for years waged a campaign against patent
settlements that can delay the introduction of generic drugs that provide a
cheaper alternative to their brand-name counterparts.

But the two parties have seen a growing divergence on industry mergers in
recent years, especially as newer, younger Democratic commissioners have
grown dissatisfied with the approach favored by Republicans—and a previous
generation of Democrats.

“The two sides are like two ships passing in the night,” said Michael
Carrier, a professor at Rutgers Law School who focuses on antitrust and
intellectual-property law.

The FTC has challenged portions of drug-company mergers with regularity but
doesn’t often block such deals outright. Instead, merging drug companies
usually agree to sell off assets when they have overlapping product lines
in their pharmaceutical portfolios.

A typical example came last year, when the commission allowed AbbVie Inc.’s
$63 billion acquisition of Botox-maker Allergan PLC on the condition that
the merged firm sell off Allergan’s rights and assets related to three

The FTC’s approval of that deal came on a 3-2 vote, with Democrats, then in
the minority, dissenting. Ms. Slaughter’s dissent argued that focusing on
overlapping products and drug pipelines wasn’t enough. Instead, the FTC
should be analyzing industry mergers with a broader lens to consider issues
such as how a merger might affect research and development and innovation,
she said.

The FTC’s Republican majority at the time said the commission appropriately
investigated the potential loss of competition threatened by the
AbbVie-Allergan transaction and fully remedied those concerns by requiring
the merged firm to divest assets.

Ms. Slaughter and fellow Democrat Rohit Chopra also dissented when the
commission in 2019 approved Bristol-Myers Squibb Co.’s $74 billion
acquisition of Celgene Corp., one of the largest drug-industry mergers ever
that produced a cancer-therapy powerhouse.

In response to growing Democratic objections, FTC Republicans have said the
commission needs more than vague or speculative concerns about industry
consolidation to file a lawsuit that seeks to block a merger. They have
also suggested that some problems presented by the heavily regulated
pharmaceutical industry fall outside the commission’s antitrust

The FTC’s initiative will explore the kinds of questions Ms. Slaughter
previously raised, including whether it is possible to make broader
arguments against pharmaceutical mergers—and what kind of evidence
antitrust regulators would need to do so.

In the interim, the commission is evenly divided 2-2 after the former
Republican chairman, Joseph Simons, stepped down earlier this year. Mr.
Chopra, meanwhile, has been tapped by Mr. Biden to lead the Consumer
Financial Protection Bureau, meaning the president will need to install two
Democrats on the FTC. He is planning to nominate Lina Khan, who has
criticized technology companies and urged tougher enforcement, for one of
those positions.

Write to Brent Kendall at brent.kendall at wsj.com and Jared S. Hopkins at
jared.hopkins at wsj.com

Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International
41 22 791 6727
thiru at keionline.org

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