Pharma Deals Reviewed at Much Higher Rates, BNA Study Finds

  • Drug industry deals scrutinized up to four times more often
  • Regulators may need to have more tools to lower drug prices

Pharmaceuticals deals are being reviewed much more often than other mergers at the Federal Trade Commission, according to an analysis of data from the FTC and Bloomberg BNA’s Deal Analytics.

Drug company acquisitions -- vilified as a key driver of price increases that hurt consumers -- were scrutinized twice as frequently as other mergers in 2013 and about four times more in 2014. Preliminary data show that they were reviewed at roughly three times the rate of other mergers in 2015. Most of the acquisitions ultimately won approval because the agency could assuage concerns with targeted asset sales.

Pharmaceuticals is a narrow area with many sub-markets that each have a lot of consumer impact, prompting the frequent reviews. Any two companies are likely to have at least some overlap in an area that requires a more careful look than the boilerplate reporting information provides – including information about drugs in the pipeline that might compete in the near future. The pace of reviews reflects how tough it can be to predict the future of a competitive market and what a merger will do to prices.

The reviews tracked can be anything from a "second request" for information from the merging parties, which indicates an investigation of the deal, through an administrative complaint or even a court case.

For companies, that means they will often have to provide the FTC with more information about the merger and delay the deal longer than the bare minimum called for by statute.

What BNA data show -- the in-depth reviews, followed by divestitures and approvals -- is that regulators at the agencies and in Congress may need more in their toolkits if they want to keep drug prices down.

The FTC is already giving these mergers careful review, kicking the tires and investigating lots of markets. From a policy perspective, if the industry is still consolidating too much, officials may need to tackle the issue from another direction.

Today’s 10 largest drug companies swallowed up more than 50 others over the course of the past two decades. From April 2015 to April 2016, the FTC demanded asset sales in 16 of its merger reviews; six of those involved pharmaceutical company deals.

The antitrust agencies face increased political pressure to curb what some contend is market power in the pharmaceutical industry. Given the steady drumbeat of announced deals and that added pressure, scrutiny of pharma mergers is unlikely to ease.

Senator Amy Klobuchar of Minnesota, the top Democrat on the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, has called on the FTC to investigate pharmaceutical companies for possible antitrust violations in light of what she called "alarming drug price increases."

At a March Senate hearing, FTC Chairwoman Edith Ramirez said the pharmaceutical industry has "experienced significant merger activity in recent years" and that the FTC "continues to carefully review mergers between pharmaceutical manufacturers and require divestitures where necessary to maintain competition."

"The Commission is committed to enforcing the antitrust laws in pharmaceutical markets to promote competition and prevent conduct that is likely to harm consumer welfare," Ramirez said.

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