ITIF Report Finds Balanced Competition Policies Critical to Preserve U.S. Leadership in Biopharmaceutical Innovation

Mar 27, 2024 | Blog Post

In its recent report “Not Again: Why the United States Can’t Afford to Lose its Biopharma Industry,” the Information Technology & Innovation Foundation (ITIF) highlights the important role of balanced competition policies in establishing and maintaining U.S. leadership in biopharmaceutical innovation.

The report’s authors note that a previous focus on balanced and bipartisan legislation has paved the way for accelerated medical and scientific progress, while delicately balancing innovation with patient access. Within the highly competitive ecosystem created by these policies, mergers and acquisitions (M&A) serve as a critical pathway for life sciences companies of all sizes to be able to secure the resources, investment and expertise necessary to advance new innovations. Unfortunately, recent shifts in the tenor of U.S. competition policy risk upending this dynamic ecosystem and could jeopardize U.S. leadership in bringing innovative new treatments to patients.

Highlights from the report are included below:

  1. The U.S. life sciences ecosystem leads the way in the approval of new treatments and cures.
    • 74% of the new molecular entities (NMEs) approved worldwide from 2015 to 2021 were first approved in the U.S.
    • U.S. biopharma companies are responsible for more than 40% of the early-stage products in the pipeline globally.
  2. The constant stream of new innovations advanced by the U.S. life sciences industry drives economic growth at home and abroad.
    • The U.S. biopharmaceutical industry directly employs more than 1.2 million people across the country, at wages significantly higher than the national average.
    • Global value-added output from the U.S. pharmaceutical industry rose to $182 billion annually in 2019, nearly doubling since 2002.
  3. M&A is crucial to help companies of all sizes weather the significant time and cost pressures they face, and ultimately, bring these innovative new medicines to patients.
    • “In the pharmaceutical industry, which is capital and technology-intensive, organizing production under a market structure involving many small producers transacting with each other may not be economically rational. This is because the necessary R&D efforts, investments, and technology required to develop new drugs are highly specific and would lead to excessively high transaction costs.” (link)
    • “A more concentrated market structure, in this case, is not only more efficient than the alternative, but also enables the development of new drugs that may otherwise never be produced due to prohibitive transaction costs.” (link)
  4. Departing from our long legacy of supportive competition policies could undermine U.S. leadership in biopharmaceutical innovation, jeopardizing the next generation of treatments and cures for patients.
    • “…policies recently made or proposed by the Biden administration put America’s successful life-science innovation environment at serious risk, and may put the United States on the same path it’s suffered on in many other advanced industries: unnecessarily losing leadership in an industry vital to U.S. economic competitiveness.” (link)
    • “To maintain competitiveness in the still strong biopharma sector, policymakers need to stop taking for granted U.S. capabilities and jobs in the industry and instead create a supportive policy environment that stimulates private-sector domestic biopharmaceutical innovation and production.” (link)

ITIF’s report comes as a new approach to M&A enforcement by the Federal Trade Commission and Department of Justice risks disrupting the United States’ world-class life sciences ecosystem. Taken together, the Agencies’ recently finalized merger guidelines and proposed premerger notification rule under the Hart-Scott-Rodino Antitrust Improvements Act represent a seismic shift towards more aggressive scrutiny of M&A and could deter deals intended to advance new treatments to patients. As a result, it is vital that the Agencies bear the findings of this report in mind and return to a balanced and bipartisan approach to M&A review and enforcement in the life sciences.