Following a number of attempts to block acquisitions within the biopharmaceutical industry—or at the very least, put them under increased scrutiny—the U.S. Federal Trade Commission last month introduced new draft merger guidelines.
While the agency has historically concentrated on protecting direct competition, the 13 proposed guidelines take on a wider scope, potentially allowing the FTC space in which to focus on concentration, negotiation or displacement within given markets. Biotechnology firms, drug development labs and others are meanwhile grappling with the ways in which their own attempted mergers might be impacted.
The draft guidelines are controversial, to put it lightly. At first glance, mergers are often considered a way for larger entities to build upon their assets. But for smaller biotechnology, pharmaceutical and medical technology companies, the FTC’s proposed guidelines would make resources and exits more challenging to obtain.
“Drug development and delivery is such a complex and risky endeavor. Deals are essential to manage that risk,” Noah Brumfield, an antitrust attorney and partner at Allen & Overy, told BioSpace in an email. “[The guidelines] elevate the risk for deals that previously would not have gotten a second look—for example, deals that only involve complementary assets (i.e. no rivals).”
Such appears to be the case with Amgen’s $26.4 billion attempted merger with Horizon Therapeutics. Amgen argued last month that the FTC’s concerns are “entirely speculative.” In a statement following the FTC’s lawsuit, the company claimed that the medicines offered by each company “generally treat different diseases and patient populations,” thus precluding any overlaps of competitive concern.
Amgen’s press team declined to comment on the proposed guidelines’ potential impact.
What Do the New FTC Draft Guidelines Entail?
Based on some of the FTC’s draft guidelines, it appears the agency might increase its commitment to preventing these issues. The guidelines state that mergers should not “increase the risk of coordination” or “eliminate a potential entrant in a concentrated market.”
They also warn against mergers that “significantly increase concentration in highly concentrated markets” or “entrench or extend a dominant position,” which some argue would occur via IQVIA’s acquisition of Propel Media. The FTC sued to delay that deal as well, arguing that it would reduce competition by “combining two of the top three providers” in the healthcare advertising industry.
The draft’s introduction closely follows a statement made by Holly Vedova, director of the FTC Bureau of Competition, in light of the attempted Amgen/Horizon merger. Vedova decried “rampant consolidation in the pharmaceutical industry” in an FTC press release about the lawsuit it filed in May to prevent the deal from going through.
Vedova and some of her colleagues expressed concern that the deal could prevent affordable generics from entering the market. They also said they were worried that cross-market bundles or bundled rebates could be used as leverage to earn Horizon’s Tepezza (teprotumumab-trbw) and Krystexxa (pegloticase) favorable formulary placement with insurance providers, thus reducing space for competing pharmaceutical companies.
Should the FTC cement its guidelines, biopharmaceutical companies already under the microscope might face increased scrutiny. In addition to the Amgen-Horizon and IQVIA-Propel deals, the agency is already looking closely at Pfizer’s $43 billion buyout of Seagen, a cancer-focused biotechnology company.
Pfizer originally notified the Securities and Exchange Commission (SEC) of the deal back in March but withdrew its paperwork to refile in June following news of Amgen’s Horizon delay. The FTC has since asked for more information on the merger due to concerns regarding competition and drug pricing. A Pfizer spokesperson declined to comment for this article upon BioSpace’s request.
As for whether the guidelines will be implemented as-is, Brumfield told BioSpace it’s quite likely. “It is notable that the process is being undertaken with an FTC that is not bipartisan—two of the five Commissioners are not seated, seats that are reserved for the party in opposition,” he said, referring to the agency’s current Democratic makeup. “And so despite the intent of Congress in enacting the FTC Act and requiring a bipartisan Commission, there is no other voice in the room arguing for modifications or limits on the expansive approach taken with these new draft guidelines.”
When it comes to looking ahead, Brumfield warns that proposed deals can be expected to take much longer. “Review [will] involve many more issues and a commensurately greater burden on parties,” he said. “The open-ended approach reflected in the new guidelines would mean potentially no issue is too attenuated for investigation.”
https://www.biospace.com/article/how-the-ftc-s-proposed-merger-guidelines-might-impact-biopharma-/
