Over the past several decades, the U.S. life sciences ecosystem has emerged as a global leader in innovation with more than 2,300 biopharmaceutical companies spanning every state. Pro-innovation mergers and acquisitions (M&A) have been a critical component of the unique U.S. life sciences ecosystem, fueling diversity, partnerships and efficiencies among innovative companies of all sizes. Today, the U.S. accounts for 85% of the world’s small, research-intensive biopharmaceutical firms, according to a recent study by ITIF.
A growing body of real-world evidence, rooted in decades of balanced competition policies, supports the central role of M&A in fueling life sciences innovation. In a seminal report, the Congressional Budget Office (CBO) highlights the unique and differentiated skills, resources and infrastructure that life sciences companies of all sizes bring to bear to advance new innovations.
Nimble and highly specialized early-stage firms are hubs for scientific discovery with the potential to drive the next generation of treatments and cures. “Small companies—with relatively fewer administrative staff, less expertise in conducting clinical trials, and less physical and financial capital to manage—can concentrate primarily on research,” the authors of the report write. M&A also serves as a potential exit point for investors, helping these companies secure the necessary investment to incubate, advance and deliver early-stage innovations.
Larger life sciences companies possess the crucial – and complementary – infrastructure and resources that help them facilitate clinical trials, navigate the regulatory approval process and coordinate with pharmacists, hospitals and health plans to ensure access to new medicines for patients. “In making [an] acquisition, a large company might bring a drug to market more quickly than the small company could have or might distribute it more widely. They also have readier access to markets through established drug distribution networks and relationships with buyers,” the CBO report notes.
In its report, the CBO articulates a shared consensus among legal experts, economists and policymakers that has existed for nearly five decades: M&A is vital for life sciences companies of all sizes to secure the resources, expertise and infrastructure necessary to navigate the complexities of the biopharmaceutical market, bring new products to market and ultimately help patients. Collaboration, including through M&A, allows life sciences firms to lean into their strengths and navigate increasing scientific, financial and regulatory demands more effectively and efficiently.
The CBO’s conclusions continue to be reinforced by outside evidence. Following 10 years of increased M&A activity, the rolling five-year average of new therapies approved by the U.S Food and Drug Administration (FDA) more than doubled – rising from 24 in 2010 to 49 in 2022. Each of these therapies represents substantial progress in our fight against disease, creating new hope for patients in need.
The Federal Trade Commission and Department of Justice have proposed sweeping reforms that seem to ignore this long-standing body of evidence, instead favoring an ill-informed approach to antitrust enforcement which would deter pro-innovation M&A in the life sciences. The agencies’ proposed approach not only jeopardizes a central part of the world-class U.S. life sciences ecosystem; it also puts potential new treatments and cures at risk for thousands of patients. It is vital that our regulators support American leadership in life sciences innovation by preserving a balanced approach to M&A.