The Federal Trade Commission recently proposed new draft merger guidelines in an effort to reign in acquisitions in the biopharmaceutical industry and put them under greater scrutiny. These guidelines are the latest in a series of attempts by the FTC to prevent large-scale mergers in the biopharmaceutical world from taking place unchecked.
The FTC is expanding its scope, proposing 13 new guidelines that could allow for broader enforcement and tighter regulations when it comes to market concentration, negotiation and displacement, with a particular focus on industries like biotechnology and drug development. These proposed guidelines have been met with apprehension from companies looking into the possibility of mergers and acquisitions, as they can now expect closer oversight from the enforcements arm of the FTC.
Mergers are often viewed as a boon for large corporations, however the FTC’s proposed guidelines for biotechnology, pharmaceutical and medical technology companies could make the resources and exits necessary for success more difficult to attain. This proposal has been met with plenty of pushback from company leaders, leading to a heated debate.
The complexity and risk associated with drug development and delivery makes deals essential for mitigating those risks. The recently released guidelines from the U.S. Department of Justice, however, have elevated the risk for such deals, even those that involve complementary assets and no rival companies. As Noah Brumfield, partner at Allen & Overy and antitrust attorney, said in an email to BioSpace, “This highlights the need to be very careful when structuring deals that involve drug development and delivery.”
As the complexity and risk associated with drug development and delivery increasingly put such transactions in the spotlight, the U.S. Department of Justice has released new guidelines that heighten the stakes even further. This makes it clear that careful consideration must be taken when structuring such deals, even when they involve complementary assets and no rival companies. Noah Brumfield, partner at Allen & Overy and antitrust attorney, notes that this underscores the importance of being especially prudent in this arena.
Amgen’s press team was tight-lipped on the implications of the proposed guidelines for the company, declining to comment.
What Do the New FTC Draft Guidelines Entail?
The FTC is vowing to become more proactive in preventing anti-competitive mergers and acquisitions by setting more stringent regulations. Its proposed guidelines specifically forbid any consolidations that could incentivize coordination or deter potential entrants in a concentrated market. This is an encouraging development for both businesses and consumers, as it suggests that anti-trust measures will be more strictly enforced going forward.
The Federal Trade Commission (FTC) is sounding the alarm against mergers that could lead to excessive concentration in markets or serve to entrench or extend a dominating position. This appears to be the driving force behind their recent lawsuit to delay the acquisition of Propel Media by IQVIA, which could reduce competition in the healthcare advertising industry by consolidating two of the three top providers.
The FTC decried “rampant consolidation in the pharmaceutical industry” when it announced its lawsuit against the proposed Amgen/Horizon merger in May. Holly Vedova, director of the FTC’s Bureau of Competition, emphasized the significance of this decision in statement accompanying the release: “We must do all we can to stop consummations that would unlawfully reduce competition…” The draft introduction echoes this sentiment and serves as a strong reminder of this critical action taken by the FTC to protect consumers.
Dr. Vedova and her team had expressed their apprehensions about the deal, wondering whether it might stifle the entry of affordable generic drugs into the market. Additionally, they were worried that Horizon could effectively influence insurance providers through bundled rebates, thereby creating a lopsided competitive advantage and hindering other pharmaceutical companies’ access to formulary placement.
Biopharmaceutical giants such as Amgen-Horizon, IQVIA-Propel and Pfizer’s massive $43 billion buyout of Seagen are increasingly coming under scrutiny with the FTC seeking to cement its guidelines. As the agency takes an even closer look at the deals involved, such companies may be subject to greater regulatory oversight.
Pfizer submitted a notification to the Securities and Exchange Commission (SEC) in March but pulled it back later in June after the news of Amgen’s Horizon delay emerged. This raised the eyebrows of the Federal Trade Commission (FTC) as they sought further evidence on the merger’s impact on competition and drug pricing. When contacted by BioSpace for comments on the subject, a Pfizer representative declined to comment.
The FTC’s new draft guidelines are likely to be implemented as-is, despite the lack of a bipartisan voice at the agency. With only three of the five Commissioners in place, the opposition party’s input is noticeably absent from the decision-making process, despite Congress’s intentions for a bipartisan FTC.
The new guidelines mean a more drawn-out process for proposed deals, as all issues, no matter how minor, will be up for review. According to David Brumfield, the extra investigation could result in a commensurate increase in the burden felt by involved parties. No issue or factor will be overlooked, making for an open-ended review that promises to be thorough, but long.