The U.S. Federal Trade Commission (FTC) and Department of Justice, Antitrust Division (DOJ) recently hosted a two-day virtual workshop titled "The Future of Pharmaceuticals: Examining the Analysis of Pharmaceutical Mergers." The workshop followed the agencies' creation of a Multilateral Pharmaceutical Merger Task Force in March 2021 and an invitation for public comments concerning potential changes to analysis of pharmaceutical mergers. The FTC and DOJ are also currently in the process of revising their general merger guidelines, and the antitrust community is expecting significant revisions to their past analytic approach (see our prior coverage here).

The workshop took a broad view of the effect of pharmaceutical mergers, highlighting potential effects and theories of harm that have not historically been a focus of merger reviews. Overall, the panelists chosen for the workshop highlighted voices that largely favored increased scrutiny of pharmaceutical mergers, including speakers from the FTC, DOJ, state-level antitrust enforcers, and academia. Also present were representatives from the European Commission Directorate-General for Competition and UK Competition and Markets Authority, providing a view of these issues from outside the United States. The topics discussed at the workshop may provide a preview of things to come in the anticipated new merger guidelines, as well as possible pharmaceutical-specific reports and guidance.


As the FTC and DOJ continue working to revise their merger guidelines, the pharmaceutical mergers workshop highlighted new analyses and theories of harm that might be adopted into those official guidelines and might expand scrutiny of mergers in the pharmaceutical industry. Firms considering mergers or acquisitions in the pharmaceutical space should consider the following:

  • Antitrust enforcers are considering new theories—including cross-market effects, portfolio effects, and innovation effects—that might make mergers harder to clear even when there is not a traditional molecule-to-molecule or indication-to-indication competitive overlap.
  • Large mergers, and acquisitions of any size by large players in the pharmaceutical space, are likely to continue facing ever-closer scrutiny from antitrust enforcers.
  • Parties to a transaction should expect closer scrutiny from enforcers where any party has been previously found guilty—or perhaps even accused—of past anticompetitive behavior. Parties in this situation should be prepared to address such concerns in early engagement with enforcers and explain why prior conduct (whether alleged unilateral/monopolistic conduct or joint/collusive conduct) is not reflective of either an uncompetitive market generally or the firm's being a unique bad actor.
  • New FTC and DOJ merger guidelines are expected to be released, potentially by the end of 2022, and will shed further light on the agencies' approach to mergers generally, including transactions within the pharmaceutical sector.
  • Businesses should continue monitoring the changing agency approach and consult experienced antitrust counsel at the earliest stages of considering any merger or acquisition.

We provide additional summary of the workshop panels below.


The workshop began with opening remarks from FTC Chair Lina Khan and DOJ Antitrust Division head Jonathan Kanter. Khan described the state of the pharmaceutical industry as one where median prices are soaring, "killer" acquisitions are relatively common, and the biggest companies develop few of the leading drugs being introduced. Kanter added to Kahn's introduction, warning of the potential for harmful mergers and other anticompetitive conduct to impede the ability of Americans to obtain pharmaceuticals at affordable prices. Kanter framed his goal for pharmaceutical antitrust enforcement as promoting access to quality medicine.


A key topic addressed by the workshop is the source of pharmaceutical innovation and the impact on antitrust enforcement. Several panelists challenged the common idea that large firms, armed with greater resources, produce more innovation than small firms. Patricia Danzon of the University of Pennsylvania asserted that large firms tend to have greater access to capital to fund R&D efforts, but nonetheless the share of drug innovation coming from small companies is very large. Rena Conti of Boston University expanded on this point by separating follow-on innovation in crowded pharmaceutical spaces (where large firms tend to innovate) from breakthrough innovation, where smaller startups and universities have been focusing their efforts. Regulators may pay particular attention to proposed mergers involving these small entities developing unique innovations in the future in an effort to protect competition. Further, FTC Commissioner Rebecca Slaughter emphasized protecting innovation through consideration of the impact of mergers on not only the incentives of the merging firms but also the effect information stemming from R&D might have on non-merging firms in contributing to further innovation. This suggests the FTC may broaden the scope of its assessment of innovation effects in pharmaceutical mergers.


The issue of firm size was a key point of discussion throughout the workshop's panels, with some panelists positing that the size of merging pharmaceutical companies and a study of cross-market effects should factor more heavily into the analysis of potential mergers. Professor Danzon discussed the impact of firm size on negotiations with pharmacy benefit managers (PBMs)—another topic the FTC has recently announced it will study in depth. Danzon argued that larger pharmaceutical companies can gain cross-market leverage in PBM negotiations because of their ability to offer PBMs a full portfolio of drugs and deeper discounts for more expensive products. Danzon encouraged pharmaceutical merger reviews to give greater consideration to concerns that a merger could increase the likelihood that the merging parties have sufficient market power to engage in bundled discounting or full-line forcing. Some panelists acknowledged that cost savings from mergers partially offset potential losses in competition, but that such cost savings are less likely in a merger between two large firms that may already have achieved these efficiencies in financing, marketing, and other areas.


Panelists also encouraged antitrust enforcers to consider prior bad acts—including collusion and previous killer acquisitions, among others—by either the target or the acquiring firm. Gwendolyn Cooley, head of antitrust enforcement in the Wisconsin Attorney General's office and chair of the National Association of Attorneys General Antitrust Task Force, advocated for regulatory agencies to include past conduct in the analysis of post-merger market effects, suggesting that evidence of prior anticompetitive practices may make it more likely that a merger reduces competition or leads to further bad acts. The depth of review of prior bad acts by merging companies may also depend on the nature of the market and the transacting parties. For example, regulators may pay closer attention to prior bad acts by a large, mature firm than by a small startup. Further, some panelists noted that prior bad acts affecting one product market—such as a history of pay-for-delay, patent thickets, or price increases post-acquisition—could also result in heightened scrutiny of deals in other products markets or portfolio effects.


The workshop provided a broad look at the factors that might be considered by regulators in analyzing proposed pharmaceutical industry mergers. Panelists discussed both backward- and forward-looking metrics, from prior anticompetitive practices of merging firms to the creation, or stamping out, of new innovations. The pharmaceutical industry can expect that at least some of these considerations will influence the forthcoming new FTC/DOJ merger guidelines. Businesses considering new mergers or acquisitions in the pharmaceutical space should closely monitor the evolving antitrust regulatory landscape and consult experienced antitrust counsel as early as possible in any deal process.

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