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Government takes steps to add oversite to pharmaceutical mergers

The Federal Trade Commission (FTC), U.S. Department of Justice Antitrust Division, and offices of state attorneys general along with the Canadian Competition Bureau, European Commission Directorate General for Competition, and U.K.’s Competition and Markets Authorities are working together to increase monitoring efforts when it comes to pharmaceutical mergers. The move, according to a representative of the FTC, is in response to a jump in mergers followed by medication price hikes.

Why is the FTC involved?

The FTC is a federal agency that works to foster competition and protect consumers. The involvement of this agency is a sign that the government is concerned current pharmaceutical processes are in violation of anti-compete laws and may not result in the best situation for consumers.

What does this mean for pharmaceutical leaders contemplating or just finishing a merger deal?

Those going through a merger may find the proposed transaction under review. Both the FTC and Department of Justice generally review transactions that may affect commerce in the United States, and mergers between pharmaceutical companies can often qualify. Although exceptions are present, these federal agencies general require those moving forward with a deal report a transaction valued at or above $94 million.

Once reported, the agencies begin a preliminary review. This generally requires the parties to wait 20 days before closing the deal. The agencies can then terminate the waiting period if the review does not result in any concerning findings, allow the waiting period to expire thus allowing the transaction to move forward or extend the review if concerns are present and conduct an more thorough investigation.

The government is very clear that this collaboration is part of an aggressive approach to reviewing these mergers for anticompetitive conduct with a focus on price fixing and reverse payments. The FTC notes that the project will lead to a fresh approach to investigations that will likely include:

  • Expansion of the current theories of harm within this marketplace.
  • New considerations for regulatory abuse.
  • Review and potential update of evidence needed to challenge theories of harm.
  • Review and potential update to remedies in the event of a violation.

We will provide updates on the findings of this working group and how they could impact future pharmaceutical mergers as they become available.