The Pro-Competition Policies Driving Life Science Innovation

Oct 3, 2023 | Blog Post

America has a long history of enacting sound, bipartisan policies that have created powerful incentives for life sciences innovators to invest in the costly, extensive research and development (R&D) process behind groundbreaking treatments and cures. These pro-innovation policies have been carefully balanced by market protections that promote access to a wide range of treatment options for patients. From the Hatch-Waxman Act, the Orphan Drug Act, the Bayh-Dole Act, the 21st Century Cures Act and other critical pieces of policy, decades of bipartisan policymaking has allowed the robust U.S. life sciences ecosystem to flourish.

Over many years, our nation took a similarly balanced approach to competition policy. As a result, mergers and acquisitions (M&A) across the life sciences sector have allowed companies of all sizes to leverage expertise and experience to bring new treatments and cures to patients around the world.   

Recently, some policymakers and critics have wrongly placed the blame for drug costs on life sciences M&A broadly, seemingly dismissing the role of insurers and pharmacy benefit managers in determining the price patients pay for their medicines.Case in point: when adjusted for inflation and manufacturer rebates and discounts, name-brand drug prices have fallen over the past five years – dropping nearly nine percent in 2022 alone – even as M&A activity remained steady. Despite this, the Federal Trade Commission (FTC) is proposing a far-reaching approach to restricting M&A with no precedent or basis in long-standing principles of competition. The FTC’s approach amounts to solutions in search of a problem.

By deterring pro-innovation M&A, the FTC would disrupt the unique, bipartisan policy framework that has supported the U.S. life sciences ecosystem for decades and made the U.S the global leader in life sciences breakthroughs. Federal agencies have long acknowledged that M&A allows life sciences companies to combine their complementary resources and expertise, enhance competition and incentivize investment in innovation – which could mean the difference between an innovative treatment or cure reaching patients or stalling in the lab.

The Congressional Budget Office recently asserted that M&A “can create efficiencies that might increase the combined value of the firms by allowing drug companies of different sizes—in terms of the number of researchers, administrative employees, and financial and physical assets—to specialize in activities in which they have a comparative advantage… For their part, large drug companies are much better capitalized and can more easily finance and manage clinical trials. They also have readier access to markets through established drug distribution networks and relationships with buyers.”

The FTC’s proposed approach would chill pro-innovation M&A and create uncertainty, risk inconsistent application and clash with decades of evidence that life sciences M&A benefits patients. The FTC is failing to consider the unique competitive dynamics in the life sciences ecosystem. Perhaps most concerning, the FTC is acting on a partisan basis and jeopardizing the long-standing bipartisan policy foundation underpinning the U.S. life sciences ecosystem.

This uncertainty and threat of greater antitrust scrutiny is enough to slow innovation, harm patient access to new therapies and threaten America’s position as a global leader in the life sciences. Amid an increasingly competitive global economy, and as thousands of patients already cannot afford to wait for new treatments or cures, now is not the time to undermine our progress against disease.