In a recent commentary for Law 360, biopharma expert Michael Kinch and economists Jee-Yonn Lehmann and Frederico Mantovanelli rightly point out that biopharmaceutical mergers and acquisitions (M&A) and other collaborations play an important role in promoting competition and helping companies of all sizes to innovate more efficiently.
Their analysis counters the Federal Trade Commission’s (FTC) recent scrutiny of life sciences M&A, noting that the agency’s focus on the industry writ large is rooted in a fundamental misunderstanding of the competitive dynamics of the ecosystem. The authors acknowledge that the research and development process for developing a new treatment is a costly, challenging and high-risk endeavor – and that M&A and other collaborations allow companies to combine their complementary resources and expertise and, ultimately, overcome these headwinds to bring new treatments and cures to patients.
Highlights from their analysis are included below:
- “The discovery and development of a new medicine is a complex process that often requires the work of hundreds or even thousands of scientists, billions of dollars, and an average of more than 10 years of clinical investigation.”
- “[Developing a new medicine] is also a highly risky endeavor. Overall, a small fraction of drugs that enter the clinical trial phase will ultimately receive approval from the U.S. Food and Drug Administration…”
- “The process of developing an individual drug is a process of trial and error. A potentially promising clinical candidate is subjected to waves of testing, alterations and refinements.”
- “…Drug development entails an iterative process that builds on prior knowledge — both successes and failures — and that often may benefit from advances from sources outside the company…”
- “…Not every company is able to ideate and execute the myriad activities necessary to bring a drug through the research and development process to the patient. Consequently, the biotech industry has grown ever more reliant upon mergers, acquisitions and licensing agreements among both large and small companies.”
- “It follows that not only are these activities not necessarily harmful to competition, but also that they may well be pro-competitive, as they are often necessary for a product to travel the great distance from concept to approval.”
- “Failure to consider these realities in pharmaceutical research and development may lead to a merger being labeled as a killer acquisition when its actual intention is to spur innovation.”
The authors’ analysis supports the imperative for the FTC and Department of Justice to take a balanced and bipartisan approach towards M&A review and enforcement, acknowledging the unique, differentiated and competitive market dynamics that drive our U.S. life science ecosystem, and the treatments and cures it delivers.
To view the full article, click here.