In pharmaceutical transactions involving generic products, the
Federal Trade Commission (FTC) has typically focused on narrow
antitrust theories of harm and applied a narrow product market
analysis often limited to a treatment for a particular indication
(and sometimes to a specific mechanism of action). In these
transactions, the FTC has consistently required fixes for generic
overlaps when the transaction (1) reduces the number of significant
generic competitors in a particular product market to three or
fewer or (2) involves the combination of a branded pharmaceutical
product with a "first-to-file" generic for the same
product for which there are no other generics yet on the market.
Using this narrow methodology, pharmaceutical transactions
involving generics that required a fix could move through the FTC
review process very quickly and generally achieve clearance in
approximately six months from filing.
A recent pharmaceutical transaction involving two large generics
companies had numerous overlaps of interest and took twice as long
to receive clearance (12 months). While the sheer volume of generic
overlaps at issue for which a fix was required (79 generics)
certainly could explain why achieving clearance took an extended
period, a second reason is that the FTC looked at several broader
theories of harm than it has typically focused on in past
The investigation into broader theories of harm suggests that
"business-as-usual" investigations in pharmaceutical
cases involving generics may be changing. Pharmaceutical companies
need to consider the transactions' impact not only in narrow
product specific overlaps, but also on competition broadly by (1)
considering whether the transaction would lead to anticompetitive
effects from the bundling of generic products; (2) examining
whether the transaction would decrease incentives to challenge
patents held by brand-name pharmaceutical companies and bring new
generic drugs to market; and (3) analyzing whether the transaction
might dampen incentives to develop new generic products.
While the FTC analyzed these potential impacts in the most
recent transaction, it did not ultimately find evidence which
supported a conclusion that the parties could use bundling to
foreclose smaller competitors from competing effectively. Moreover,
there was no indication that the effect of the transaction would
decrease the pace at which generics would challenge patents held by
brand-name pharmaceuticals and/or develop new generics.
Nonetheless, we think the FTC's focus on these issues portends
that any transaction involving top generics manufacturers will be
treated similarly and receiving clearance will involve the
consideration of a larger array of antitrust issues than has
typically been the case. This is an issue that merits watching as
new pharmaceutical transactions get announced in the year to
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