The pharmaceutical sector is bracing for a rise in antitrust litigation, following a shift in US regulators’ approach that now prioritizes clarifying the law over successfully blocking deals. Under the chairmanship of Lina Khan, the Federal Trade Commission (FTC) has demonstrated a greater willingness to proceed with lawsuits, aiming to set precedents defining anticompetitive conduct. This shift in practice was emphasized by recent actions such as the review of Pfizer Inc.’s $43 billion bid to takeover Seagen Inc.
Adding to these efforts, the FTC recently announced plans for data sharing with the Department of Justice and the Department of Health and Human Services. This move is intended to help antitrust enforcers uncover potentially anticompetitive acquisitions that might otherwise slip through the cracks, according to a senior administration official.
In response to the regulatory pivot, business groups are lobbying for legislative action. The US Chamber of Commerce and over two dozen other trade associations recently urged Congress to halt a phase of this transition that involves an overhaul of the FTC and Justice Department’s merger and acquisition review process. They argue the proposed changes would generate a hefty cost of over $2 billion for businesses.
David Balto, a lawyer and former FTC Assistant Director, appreciates the cautiousness of these businesses. The FTC’s tone, as set by the current administration, is a departure from the regulatory process of the past 30 years. Balto suggests this indicates a drive to establish permanent precedents governing future company conduct.
Meanwhile, a so-called “third wave” of consolidation in the pharmaceutical industry since 2010 has noticeably reduced competition across the sector. This claim is supported by Robin Feldman, a law professor at the University of California Law, San Francisco. Feldman notes that recent merger activity has largely involved big companies buying startups and a shift towards outsourcing research to smaller firms.
An example of the shift in the FTC’s approach was its decision to move forward with litigation to block Amgen Inc.’s $27.8 billion buyout of Horizon Therapeutics Plc, a move settled last September. In addition, Pfizer’s proposed acquisition of Seagen is set to face an in-depth antitrust review by the FTC. No lawsuit has been filed to stop the $43 billion deal yet.
According to Robin Feldman, companies should steer clear of making “killer acquisitions”, where one buys a rival product solely to bury it. The FTC’s Associate Director for Litigation, Shaoul Sussman, first made mention of this during a conference where he outlined proposed changes to the filings companies would be required to produce for merger review earlier this year.
The future of pharmaceuticals remains uncertain, but it is clear there will be closer scrutiny of any mergers and acquisitions moving forward. Companies are advised to tread carefully, watchful for any potential forms of anticompetitive conduct that could raise red flags for the FTC.