AAI applauded the Multilateral Pharmaceutical Merger Task Force for seeking public comment as staff from federal and state competition enforcers in the U.S.; and authorities in Canada, Europe, and the UK explore how to best update their approaches to analyzing the effects of pharmaceutical mergers. AAI urges the Task Force to consider the findings of AAI’s recent study on pharmaceutical mergers in this process.
AAI’s White Paper “From Competition to Conspiracy: Assessing the Federal Trade Commission’s Merger Policy in the Pharmaceutical Sector”reveals mounting evidence that connects high market concentration and high drug prices. Price gouging for important drugs, conspiracies to fix generic drug prices, and ever more innovative schemes by branded drug manufacturers to keep generic rivals out of the market put merger control at center stage.
The White Paper examines a major root of this problem—the Federal Trade Commission’s (FTC’s) policy of settling virtually all challenged horizontal pharmaceutical mergers with consent orders requiring divestitures. AAI’s macro-analysis of pharmaceutical mergers challenged by the FTC between 1994-2020 reveals that many drug makers engaged in serial mergers and/or repeatedly went to the till to purchase divestiture assets in other challenged mergers. Many of these firms were subsequently acquired by other pharmaceutical manufacturers, sometimes shortly after purchasing divestiture assets.
The effect of the FTC’s policy has been the swapping of assets within a relatively small group of large and increasingly powerful firms. Many of the very firms that were the most active in M&A, and as purchasers of divestiture assets, appear as defendants in private, state, and federal non-merger antitrust litigations and in federal criminal indictments. These accumulating lawsuits serve as powerful evidence that something has gone awry with merger policy in the pharmaceutical sector, leading to the exercise of market power by dominant firms and oligopolies.
Competition problems in pharmaceuticals now rise to the level a public policy concern, addressable only through a coordinated policy response, of which stronger antitrust enforcement and legislative reform should be central components. The imperative for wholesale change in the FTC’s merger policy in the pharmaceutical sector is more pressing than ever. Only robust competition among drug makers will result in the availability and affordability of drugs more generally, but also essential drug therapies and vaccines relating to the COVID-19 pandemic. Read the White Paper.