FTC prepares to take tougher stance on pharmaceutical mergers: WSJ

Acting chairwoman Rebecca Kelly Slaughter favors new approach to analyzing how drug-company deals affect competition

WASHINGTON — The Federal Trade Commission is preparing to take a harder line on drug-company mergers, announcing plans Tuesday to overhaul its process for reviewing deals that could harm competition in the pharmaceutical industry.

The initiative, spurred by the FTC’s acting Democratic chairwoman, Rebecca Kelly Slaughter, signals what could be a tougher road ahead for the industry during the Biden administration. It also highlights a growing Democratic push for stronger antitrust enforcement across the economy — and not just the tech sector, where a handful of companies have attracted bipartisan concern.

“We intend to take an aggressive approach to tackling anticompetitive pharmaceutical mergers,” Slaughter said.


“Given the high volume of pharmaceutical mergers in recent years, amid skyrocketing drug prices and ongoing concerns about anticompetitive conduct in the industry, it is imperative that we rethink our approach,” she said.

The industry’s biggest trade group, the Pharmaceutical Research and Manufacturers of America, said mergers and acquisitions “help facilitate the transfer of knowledge and expertise required to push the envelope of scientific discovery.”

The Federal Trade Commission is preparing to take a harder line on drug-company mergers, announcing plans Tuesday to overhaul its process for reviewing deals that could harm competition in the pharmaceutical industry. (Getty Images)

“Placing different standards and applying more stringent requirements on any one industry, particularly the industry leading efforts to end the current pandemic, risk undermining the unique environment in the United States that values innovation and market competition,” the group said.

Commissioner Noah Phillips, a Republican, said that he welcomed “efforts to assess competitive concerns that pharmaceutical mergers raise” but that merger enforcement “should be rooted in a viable theory of harm to competition and supported by evidence.”

The FTC initiative, which will include outside domestic and international antitrust officials, will take a broader look at how pharmaceutical deals affect the marketplace. Other participants include the Justice Department’s antitrust division, state attorneys general and competition officials from Canada, the U.K. and Europe.


During a telephone press conference, Slaughter said the commission would re-examine its conclusions from past pharma merger reviews to determine if it made obvious mistakes. The commission rarely takes action against mergers after the fact, but she noted that the FTC does have the power to do so.

Slaughter, a commissioner since 2018, was designated the acting head of the FTC by President Biden after he took office in January. She is in the running to be named the permanent chair of the five-member body, but the administration has yet to announce its plans.

Once the commission gets two Senate-confirmed nominees, Democrats will hold a 3-2 advantage, giving them room to attempt more-aggressive legal arguments against proposed drug-industry deals.

Consolidation has been a key pharmaceutical industry trend for years as companies look for new therapies and sources for growth. There were more than 900 pharmaceutical deals valued at about $800 billion between 2016 and 2020, according to a market-research firm, EvaluatePharma.

A lot of innovation in drug development happens inside small biotechnology firms that are later acquired by bigger companies. While large drugmakers do fund internal research and development, they also acquire companies and assets to help keep pipelines filled with potential medicines to help offset revenue declines or patent expirations.

The 13 largest pharmaceutical companies netted one-third of the 444 drugs approved by the Food and Drug Administration from 2010 to 2020, while about 180 other companies shared the remaining approvals, said Bernard Munos, a senior fellow at the Milken Institute.

The dealmaking typically leads to cost cuts from smaller workforces and plants closures.

The biggest pending pharmaceutical deal is AstraZeneca PLC’s $39 billion acquisition of Boston-based Alexion Pharmaceuticals Inc., announced in December. It is slated to close in the third quarter of this year.

The FTC shares antitrust authority with the Justice Department, but pharmaceutical deals fall within its jurisdiction.

Democrats and Republicans alike at the FTC have been aligned on several issues relating to pharmaceutical competition. In one major bipartisan effort, the commission has for years waged a campaign against patent settlements that can delay the introduction of generic drugs that provide a cheaper alternative to their brand-name counterparts.

But the two parties have seen a growing divergence on industry mergers in recent years, especially as newer, younger Democratic commissioners have grown dissatisfied with the approach favored by Republicans—and a previous generation of Democrats.

“The two sides are like two ships passing in the night,” said Michael Carrier, a professor at Rutgers Law School who focuses on antitrust and intellectual-property law.

The FTC has challenged portions of drug-company mergers with regularity but doesn’t often block such deals outright. Instead, merging drug companies usually agree to sell off assets when they have overlapping product lines in their pharmaceutical portfolios.

A typical example came last year, when the commission allowed AbbVie Inc.’s $63 billion acquisition of Botox-maker Allergan PLC on the condition that the merged firm sell off Allergan’s rights and assets related to three drugs.

The FTC’s approval of that deal came on a 3-2 vote, with Democrats, then in the minority, dissenting. Slaughter’s dissent argued that focusing on overlapping products and drug pipelines wasn’t enough. Instead, the FTC should be analyzing industry mergers with a broader lens to consider issues such as how a merger might affect research and development and innovation, she said.

The FTC’s Republican majority at the time said the commission appropriately investigated the potential loss of competition threatened by the AbbVie-Allergan transaction and fully remedied those concerns by requiring the merged firm to divest assets.

Slaughter and fellow Democrat Rohit Chopra also dissented when the commission in 2019 approved Bristol-Myers Squibb Co.’s $74 billion acquisition of Celgene Corp., one of the largest drug-industry mergers ever that produced a cancer-therapy powerhouse.


In response to growing Democratic objections, FTC Republicans have said the commission needs more than vague or speculative concerns about industry consolidation to file a lawsuit that seeks to block a merger. They have also suggested that some problems presented by the heavily regulated pharmaceutical industry fall outside the commission’s antitrust jurisdiction.

The FTC’s initiative will explore the kinds of questions Slaughter previously raised, including whether it is possible to make broader arguments against pharmaceutical mergers—and what kind of evidence antitrust regulators would need to do so.

In the interim, the commission is evenly divided 2-2 after the former Republican chairman, Joseph Simons, stepped down earlier this year. Mr. Chopra, meanwhile, has been tapped by Biden to lead the Consumer Financial Protection Bureau, meaning the president will need to install two Democrats on the FTC. He is planning to nominate Lina Khan, who has criticized technology companies and urged tougher enforcement, for one of those positions.