What They Are Saying: Proposed Premerger Review Rules Would Burden Life Sciences Innovators, Impede Vital New Therapies 

Oct 12, 2023 | Blog Post

In a sharp departure from longstanding precedent, the Federal Trade Commission (FTC) and Department of Justice (DOJ) have proposed substantial changes to the existing guidelines and rules for antitrust enforcement. The set of proposals – specifically, the revised 2023 Draft Merger Guidelines and the new rules for premerger disclosures and review – represent a drastic shift in U.S. competition policy and would directly undermine the life sciences ecosystem responsible for groundbreaking cures and treatments if finalized.  

Nearly 80% of life sciences companies operate without a profit, often counting on M&A to secure the resources, expertise and infrastructure necessary to advance new treatments and cures to patients. Unfortunately, the FTC’s proposed premerger notification rule threatens to obstruct this vital path to market by dramatically increasing the amount of information that merging parties must disclose to regulators before completing an M&A deal. 

By saddling life sciences companies with immense costs of compliance, this proposed rule risks delaying or even deterring pro-competitive M&A, blocking innovative new treatments from reaching patients. As part of the latest comment period on these proposed rules, we’ve included a roundup of comments from leaders across industries and backgrounds who underscore the broad-reaching impact these reforms would have on consumers.

Highlights are included below:  

“This approach is misdirected and counter to the interests of consumers (in the biopharma context, patients). Robust biopharma M&A activity is an important component of the drug development ecosystem. Absent clear signs of antitrust concern, this activity should be welcomed and supported, not subjected to heightened suspicion…The scope and the nature of the revisions send a clear message that all dealmaking will be subjected to greater scrutiny. Unfortunately, this includes the innovation-driving M&A activity on which the biotech sector depends…Acquisitions can be a necessary link between early stage R&D and late-stage approval and commercialization. Burdensome premerger reporting requirements that impede such transactions will stymie, if not overtly thwart, innovation.”

Biotechnology Innovation Organization 

“The proposed amendments to the HSR Rules represent an overhaul of well-understood, reliable standards that have been utilized by businesses, consumers, and regulators for more than 45 years…As a result, potential transactions could be significantly delayed—postponing the opportunities and job-creating investments that these transactions can create.”

– National Association of Manufacturers  

“The FTC is proposing a ‘comprehensive redesign of the premerger notification process’ that would impose alarming new costs and burdens on all reportable transactions—including the 98 percent of deals Chair Khan has conceded do not merit ‘even a second question’ by staff at the FTC…The proposed changes would impose a stiff regulatory tax on all reported transactions, whether or not they raise legitimate antitrust concern.”

– U.S. Chamber of Commerce 

“Increased burdens on the ability for early-stage growth companies to raise and access capital on a timely basis can challenge growth plans, such as new hiring, expanding into new product lines, research and development, launching clinical trials, etc…The increased costs will strain VC-backed companies that typically operate at a loss. The costs associated with compliance, such as legal fees and administrative costs, will divert capital from productive investments such as research and development, hiring, and infrastructure upgrades that are critical for startups and small businesses.”  

National Venture Capital Association

“The steps that the FTC has taken to hinder the smooth operation of the HSR merger process have already, prior to the issuance of this proposed rule, served as a de facto tax on mergers by delaying and discouraging them wherever possible. The present rulemaking appears to continue this worrisome trend, and unlike the prior actions on mergers, it will have the force of law…this proposed rule appears to take into consideration only the potential costs of mergers and few of the benefits.”  

– R Street

“Instead of using their ‘resources efficiently and effectively to focus primarily on transactions that may harm competition,’ under the new filing requirements, the Agencies will expend considerable resources reviewing transactions that pose no harm to competition…The Agencies estimate that the proposed changes would increase the hours needed to prepare HSR Filings from 37 hours to 144 hours per filing, a 107 hour increase. Further, the Agencies estimate that the changes would yield approximately $350 million in additional labor costs.”

– Competitive Enterprise Institute 

“As written, the Proposal is designed to stymie mergers and acquisitions (M&A) in the United States. The amendments in the Proposal broaden the federal government’s power to scrutinize M&A without any consideration of the collateral damage incurred on consumers, small businesses, and the U.S. economy as a whole.”  

Americans for Tax Reform

“Mergers and acquisitions (‘M&A’) play a critical role in shaping the success of our small- to medium-sized innovators and is an essential part of creating a competitive U.S. economy. It provides an incentive for startup creation and produces critical financing needed for entrepreneurs and startups to successfully realize their value. Ultimately, it leads to faster and better products and services for consumers at reduced costs…This newly proposed requirement is likely to discourage pro-competitive mergers…The result would be overdeterrence of acquisitions that have the potential to spur innovation.”

Technology Councils of North America 

“Startups and other innovative early-stage companies can face many headwinds and challenges, but historically most have avoided dealing with uncertain and burdensome rules and processes around mergers and acquisitions. The proposed rules, unfortunately, create such uncertainty and place unnecessary burdens on transactions that pose no danger to a competitive marketplace.”

– Consumer Technology Association 

“Early-stage investments are critical to enabling startups to innovate, grow, and create and meet customer demand—the very essence of competition…Rather than propose changes that will streamline filing and focus reporting on those transactions that are likely to raise competitive concerns, the NPRM imposes significant burdens on all reportable transactions…by the Commission’s own admission, the proposed changes to the HSR form are ‘significant and impose additional burden on some filing parties.’”

– Managed Funds Association 

The current HSR system does an exceptionally good job of providing the Agencies the information they need to screen for potentially anticompetitive mergers…where the current HSR system falls short is not in its 0.0025% rate of false negatives, but in its 97% rate of false positives — the overwhelming majority of HSR-reportable transactions that are either competitively harmless or affirmatively procompetitive, but nevertheless are burdened by HSR’s costs.

Foley and Lardner, LLP 

“The net result of the Draft Rules would be a tax on transactions, deterring pro-competitive transactions and leading to a less vibrant and competitive market for transactions.”  

New York City Bar Association

As a partnership of entities devoted to a common goal, we urge the agencies to preserve the balanced approach to M&A that allows life sciences companies of all sizes deliver new treatments and cures more effectively and efficiently.