A Timeline of the FTC & DOJ’s Flawed Approach to Life Sciences M&A

Mar 11, 2024 | Blog Post

In recent years, the Federal Trade Commission (FTC) and Department of Justice (DOJ) have taken an increasingly aggressive approach towards life sciences mergers and acquisitions (M&A). This new approach not only represents a substantial pivot away from the Agencies’ own long-standing precedent of balanced, bipartisan antitrust policy, but also risks obstructing the many complementary relationships that M&A fosters, which are responsible for bringing innovative new treatments and cures to patients.

Throughout the long and arduous journey to bring a new medicine to patients, life sciences companies of all sizes rely on pro-innovation M&A to combine their unique skills and resources, and ultimately innovate more efficiently. As recently as 2020, the Agencies acknowledged the importance of a balanced approach to M&A review and enforcement:

“Mergers are one means by which firms can improve their ability to compete. It would be illogical, then, to prohibit mergers because they facilitate efficiency or innovation in production.”

Policy Statement, Federal Trade Commission (2020)

Unfortunately, the Agencies have recently failed to acknowledge the unique competitive dynamics that shape the life sciences industry. Instead, the Agencies have taken steps to broadly deter pro-innovation M&A across the life sciences ecosystem:

  • March 2021 – FTC & DOJ announce Multilateral Pharmaceutical Merger Task Force: Made up of antitrust enforcers from the U.S and abroad, the Task Force launched with the stated goal of retooling the Agencies’ approach to M&A review and enforcement in the life sciences. Unfortunately, as commenters noted in remarks to the Task Force, the current state of competition in the life sciences does “not support the need for a pharmaceutical merger overhaul” (U.S. Chamber of Commerce). In fact, “eliminating or restraining the opportunity for mergers and acquisitions will severely impede the ecosystem that has catapulted the U.S. life sciences and biomedical innovation ecosystem into its current leadership position in the world” (Biotechnology Innovation Organization).
  • June 2022 – FTC & DOJ host “Public Workshop on the Future of Pharmaceuticals: Examining the Analysis of Pharmaceutical Mergers”: Despite cautions from the industry about potentially disrupting the world-class U.S. life sciences ecosystem, this workshop “made clear that the FTC has every intention of making changes to the way it reviews pharmaceutical mergers,” (Buchanan). Although workshop panelists did not commit to any particular policy stance, the Agencies’ aggressive new approach to life sciences M&A began to take shape within the year.
  • June 2023 – FTC introduces proposed Hart-Scott-Rodino (HSR) Act premerger notification rule: This proposed rule would dramatically increase the amount of information that merging parties are required to disclose before completing an M&A deal. Importantly, in this proposal, the FTC ignores a key dynamic: The vast majority of transactions that are subject to these reporting requirements are plainly pro-competitive.
  • July 2023 – Agencies introduce Draft Merger Guidelines: The Draft Merger Guidelines foreshadowed a significant overhaul of the Agencies’ approach to competition policy, suggesting that even theoretical and speculative impacts on competition could be used to deem a deal unlawful. Although the merger guidelines do not hold the force of law, the unclear standards of competition proposed in the draft guidelines opened the door for the Agencies to challenge a broad array of potentially pro-competitive deals.
  • December 2023 – Agencies finalize 2023 Merger Guidelines: Despite nominal revisions, the final guidelines remained largely unchanged from the July draft. In fact, as one analysis noted, the finalized guidelines served mostly as a formal acknowledgement of “many developments already seen at the Agencies” – in other words, a marked shift toward more aggressive M&A enforcement. For life sciences companies, this shift has introduced greater uncertainty to an already high-stakes ecosystem and risks upending a key path to bring new medicines to patients.
  • Early–Mid 2024 (Expected) – FTC releases finalized HSR premerger notification rule: If finalized, the rule is expected to impose substantial costs of compliance from increased reporting requirements on merging parties by default. Given that 80% of life sciences companies already operate without a profit, these costs may be enough to stop an M&A deal – and a potentially life-changing new medicine – in its tracks.

Thanks to decades of balanced and bipartisan competition policies, the U.S. life sciences industry has emerged as among the most competitive in the world, with more than 2,300 companies, operating in all 50 states, working to revolutionize our approach to treating disease. Now, with more than 8,000 potential new treatments and cures in the pipeline, it is vital that that the FTC & DOJ reconsider their approach to life science M&A enforcement, and return to the balanced approach that patients count on to bring the next generation of biopharmaceutical breakthroughs to patients.