Last month, the U.S. Federal Trade Commission took a bold step in their efforts to regulate the biopharmaceutical industry, introducing new draft merger guidelines. The move was seen as a way to strengthen the regulations of potential corporate takeovers and ensure the sector is not subject to unscrupulous activities. This action was seen as a sign that the FTC is looking to create a more competitive environment within the biopharmaceutical sector.
The Federal Trade Commission (FTC) is shifting the focus of its mission with the introduction of thirteen new guidelines, which have the potential to shape the competitive strategies of biotechnology and drug development labs. This is a break from the agency’s traditional approach of safeguarding only direct competition, and gives the FTC the opportunity to examine market concentration, negotiations and displacements. With the new guidelines in place, many biotech firms are forced to consider their own mergers in a different light.
The draft guidelines issued by the FTC have created a stir in the biotechnology, pharmaceutical and medical technology sectors, as they put a damper on mergers which had previously enabled larger entities to expand their portfolios. To the dismay of smaller entities operating within these industries, the guidelines threaten to make resources and exits much more difficult to obtain.
Drug development and delivery is a highly intricate and potentially hazardous venture, necessitating deals as a way to effectively handle associated risk. As such, the most recent guidelines issued by antitrust regulators have heightened the danger of transactions that could have previously been regarded as safe, such as those pertaining to complementary assets with no connection to competitors. Allen & Overy partner Noah Brumfield shared his insight on the matter in an email to BioSpace, pointing out the implications of the new guidelines.
The FTC is attempting to block Amgen’s $26.4 billion merger with Horizon Therapeutics on the grounds of potential competitive concerns. In response, Amgen has strongly rejected these claims, asserting that the two medicines treat different diseases and patient populations, thus ruling out any possibility of hindering competition in the marketplace. Nevertheless, the FTC continues to pursue legal action against the merger.
When asked about the implications of the proposed guidelines, Amgen’s press team maintained a diplomatic silence.
What Do the New FTC Draft Guidelines Entail?
The FTC appears set to take a stronger stance against anti-competitive market practices with its draft guidelines. Potential mergers will be particularly watched since they can lead to worse coordination in a concentrated market, or a reduction of potential rising competitors. As such, the FTC looks to ensure that such activities are not allowed to move forward.
The US Federal Trade Commission (FTC) has issued stern warnings against certain mergers that threaten an increase in market concentration or that could potentially entrench a dominant position. This was proven true when the FTC took legal action against IQVIA for their acquisition of Propel Media. According to their complaint, this merger would have reduced competition by combining two of the three leading providers in the healthcare advertising industry.
In a stern call to arms to prevent industry consolidation, Holly Vedova, Director of FTC Bureau of Competition, spoke out against the attempted Amgen/Horizon merger. Drawing attention to the rampant consolidation throughout the pharmaceutical industry, the FTC filed a lawsuit in May to prevent the deal from going through. Through the draft released shortly after, the commission looks to set a precedent that favors competition and consumer interests over those of the industry titans.
The team of experts, led by professor Vedova, expressed alarm at the proposed deal: fearing it could prevent consumers from accessing affordable generic drugs as well as impede competition, due to Horizon’s ability to leverage bundled rebates and cross-market bundles to gain favor with insurance companies for their Tepezza (teprotumumab-trbw) and Krystexxa (pegloticase).
The FTC is stepping up their scrutiny of biopharmaceutical companies, given the proposed Amgen-Horizon and IQVIA-Propel deals and the recent Pfizer takeover of Seagen. Pfizer’s $43 billion purchase of the cancer-focused biotechnology company could draw further attention from the agency as it looks to solidify its guidelines.
In March, Pfizer informed the Securities and Exchange Commission (SEC) of its intent to acquire Amgen. However, news of Amgen’s Horizon delay caused Pfizer to withdraw their paperwork and refile it in June. With worries of competition and drug pricing, the Federal Trade Commission (FTC) asked for additional information on the merger. When contacted by BioSpace for comment, a Pfizer representative declined to provide further remarks.
Despite Congress’ intent for the Federal Trade Commission (FTC) to remain a bipartisan agency, the Commission currently consists of only three Democratic members, thus giving rise to industry speculation that the recently released guidelines on corporate disclosure practices will likely be implemented as-is. According to Wesley Brumfield, shareholder activist and managing director of global engagement at Trinity Capital, this approach is “expansive,” as there is “no other voice in the room arguing for modifications or limits”.
The proposed new deals may take a long time to come to fruition – and the new guidelines come with an increased burden of responsibility on the parties involved. As attorney Thomas Brumfield explains, this open-ended approach means no issue is too remote to be examined and investigated, so buyers and sellers should be prepared.