David H. Crean, Ph.D., Managing Partner at Cardiff Advisory, provides his insights on the potential impact of the US Federal Trade Commission (FTC)’s antitrust policies on biopharmaceutical mergers and acquisitions. Crean expects to see a continuation of 2023’s strong start to M&A and questions whether the FTC’s newly-aggressive approach will be maintained but does caution that dealmakers can expect their activities to be put under much more regulatory scrutiny moving forward.


Under the current US Government Executive administration, there has been a renewed focus on antitrust enforcement across industries, including healthcare and biopharmaceuticals. The administration has expressed concerns about consolidation and its potential negative effects on competition, innovation, and pricing. This focus on antitrust policies could have implications for mergers and acquisitions (M&A) within the biopharmaceutical industry in the near future.

The FTC is responsible for enforcing federal antitrust laws in the United States and has the authority to review and challenge M&A activities that may harm competition. The future of pharmaceutical M&A under the FTC’s current agenda will depend on the agency’s priorities, policy shifts, and enforcement actions. Additionally, buoyed by a provision passed in the omnibus spending package that increases filing fees for large mergers by as much as 700 percent, the FTC and the Department of Justice (DOJ) will have more funding to investigate these antitrust issues in 2023. For any deal over USD 500 million, the new fee will double from USD 125,000 to 250,000 and will increase even higher for deals over USD 1 billion. The fees for any deal worth over USD 5 billion will jump from USD 280,000 to over 2 million.

Some general factors that could shape the future of pharmaceutical M&A under the FTC’s oversight include:

  1. Increased scrutiny: The FTC may continue to closely scrutinize pharmaceutical M&A deals to assess their potential impact on competition, pricing, and consumer welfare. The agency may evaluate factors such as market concentration, potential barriers to entry, and the likelihood of anticompetitive behavior.
  2. Focus on healthcare costs: The FTC has expressed concerns about rising healthcare costs, including pharmaceutical prices. As a result, the agency may pay particular attention to M&A transactions that could lead to increased drug prices or reduce competition in specific markets.
  3. Evaluation of innovation: The FTC might consider the impact of mergers on innovation within the pharmaceutical industry. The agency could assess whether a proposed merger would enhance or stifle competition and innovation, as well as its potential effects on research and development activities.
  4. Collaborations and partnerships: The FTC has recognized that certain collaborations and partnerships in the pharmaceutical industry can have pro-competitive benefits, such as advancing research and development or accelerating the availability of innovative treatments. The agency may continue to evaluate such collaborations on a case-by-case basis.


FTC Questioning M&A Activities

Biopharma M&A is off to a strong start in 2023, with several major multi-billion-dollar deals announced so far, including Merck (MSD globally)’s USD 11 billion buyout of Prometheus Biosciences and Pfizer’s USD 43 billion acquisition of Seagen. However, Wall Street analysts are now assessing whether the recently filed FTC lawsuit could have a chilling effect on the year’s dealmaking enthusiasm. The FTC filed a lawsuit in May 2023 in an attempt to block Amgen’s nearly USD 28 billion buyout of Horizon Therapeutics. As reported by EndPoints, FTC chair Lina Khan stated that reviewing Big Pharma mergers is a priority. More detailed coverage of the Amgen – Horizon deal highlights the agency’s arguments (sources: here, here, here, and here). In 2020, the FTC narrowly approved AbbVie’s USD 65 billion takeover of Allergan. The agency has long been focused on direct competition between individual products but has now broadened its mission to examine how drugmakers can leverage their size against payers and nascent rivals.

A 2022 workshop offered a roadmap for the FTC’s new approach. The FTC and the US Department of Justice (“DOJ”) Antitrust Division hosted a two-day virtual workshop on June 14–15, 2022 entitled, “The Future of Pharmaceuticals: Examining the Analysis of Pharmaceutical Mergers.” The workshop explored new approaches to enforcing the antitrust laws regarding mergers and acquisitions in the pharmaceutical industry. The workshop was the culmination of the Multilateral Pharmaceutical Merger Task Force (“Task Force”), an effort launched in March 2021 by the FTC, DOJ, offices of multiple state Attorneys General, Competition Bureau Canada, the European Commission (“EC”) Directorate-General for Competition, and the U.K. Competition and Markets Authority (“CMA”).

Numerous outside experts summoned by the FTC argued that larger pharmaceutical companies were leveraging their negotiating power to pressure companies that provide access to medicines, including pharmacy benefit managers (PBMs). The bigger the companies are, and the bigger their products, the more influence they held, the experts asserted. According to a report from FiercePharma, one FTC official also spoke of the effects of proposed mergers on innovation industry-wide, not just on R&D at the merging firms. The official pointed out, for example, that if a merger reduces the number of large pharmaceutical companies that could be potential buyers of new technologies from biotech startups, that deal may in turn affect the availability of capital to the startups. This could give the merged firm power and incentive to foreclose other innovators, thus deterring investment.


An Example of Elevated FTC Scrutiny: Amgen and Horizon

The FTC’s lawsuit in May 2023 centers around bundling, a scrutinized industry practice that involves offering multi-product discounts that make it difficult for rivals to compete. The FTC is particularly focused on the relationship between drugmakers and PBMs and the use of “bundling” of products in return for rebates for PBMs and preferred coverage for drugmakers. Furthermore, recently, the FTC announced that it was expanding its investigation into PBMs to include group purchasing organizations, or GPOs, set up by the companies.

Does this recent behavior from the agency bode well for Pfizer’s planned USD 43 billion acquisition of Seagen? Only time will tell

While Amgen and Horizon do not sell competing products, the FTC said that Amgen could use its portfolio of blockbuster medicines to entice payers to favor two Horizon drugs, thwarting potential competition. Amgen, which originally planned for the deal to wrap up by the first half of the year, said it hopes to complete the transaction by mid-December. The FTC appears poised to try and stop more deals that look like Amgen’s purchase of Horizon. Does this recent behavior from the agency bode well for Pfizer’s planned USD 43 billion acquisition of Seagen? Only time will tell.

Earlier in June, Illumina argued the FTC’s proceedings were an unconstitutional division of power after the agency rejected the company buying Grail for USD 7.1 billion. The FTC stated the USD 7.1 billion acquisition “would stifle competition and innovation in the US market for life-saving cancer tests.” Illumina purchased GRAIL in August 2021 without clearances from either the FTC or European regulators, who also informed Illumina to divest the cancer diagnostics firm. As reported by STAT, that decision has been the crux of a proxy fight staged by the legendary Wall Street figure Carl Icahn, who has said that going forward with the deal without regulatory approvals was reckless and endangered Illumina’s core business of selling the technology that companies like GRAIL use to decode genetic information.


Proposed New Rules by FTC

According to a press release in late June 2023, the US antitrust agencies are requiring firms to turn over much more information about their transactions than before in an overhaul to merger rules for the Hart-Scott-Rodino (HSR) filing process that could delay deals by months. The agencies say the overhaul, the first in 45 years, will allow them to “more effectively and efficiently screen transactions” for antitrust concerns. The proposed changes require details about acquisitions during the previous 10 years, information on company officers, directors, and board observers, in addition to data on the firms’ workforce. The agencies will take public comments on the proposed changes for 60 days. The new rules will not go into effect until after the FTC and DOJ publish a final version, which is expected to take several months to complete.

The FTC estimated the new requirements laid out in the 126-page document would add more than 100 hours to the time it takes for firms to prepare their filings, which they said currently takes about 37 hours to complete. Antitrust advocates praised the changes as a much-needed update that will help enforcers better investigate deals. Of the 3,520 transactions reported in fiscal year 2021, the last year for which the agencies have published data, the FTC and DOJ asked for more information in 65 of them, or about 1.9 percent. Today’s filings mostly require one- and two-word responses, whereas the new proposal would ask companies to provide narrative summaries of the transaction and outline business areas where the firms compete.

An FTC official said the revamp is intended to help preserve agency resources and cut down on the need to ask for more documents or information during the first 30 days. The US agencies consulted with those of other jurisdictions, including the European Union, the UK and Canada, to see what information they require about deals up front.


M&A Fears or Warning Sign?

The biopharmaceutical industry fears that the FTC’s campaign could hamper not just large pharmaceutical companies but also small, higher-risk companies, whose venture investors are motivated by the prospect of pharmaceutical takeovers and liquidity exits. Other experts in FTCs corner profess that buyouts involving smaller firms are less likely to trigger antitrust concerns, and that these deals generally increase market efficiencies.

Large biopharmaceutical companies are not going to stop relying on biotech companies to help drive sustainable growth. If anything, it may just force them to look earlier in development, which is where most of the biotech industry currently exits

While it may have been a surprise to many, the FTC has been saying they’re going to do things differently for quite a while. The FTC is becoming much more aware of the complexity of this market and they cannot just use traditional models of competition. While Wall Street analysts initially raised concerns about the lawsuit’s impact on what is shaping up to be a busy year for M&A, others said after reviewing the May 2023 complaint that they do not expect to see a long-term impact. Regardless, it will give certain buyers some pause with respect to acquisitions that they are considering pursuing. I certainly expect M&A to continue, and it will be very interesting to see the outcome of this litigation. Large biopharmaceutical companies are not going to stop relying on biotech companies to help drive sustainable growth. If anything, it may just force them to look earlier in development, which is where most of the biotech industry currently exits.

Nonetheless, the Biden administration could potentially take a stricter approach to evaluating the competitive impact of mergers, especially those involving large pharmaceutical companies. This could result in increased regulatory scrutiny, lengthier review processes, or even challenges to proposed mergers. While the specific outcomes and impacts of FTC policies on the biopharmaceutical industry remain uncertain, I expect M&A deals to face more scrutiny from regulatory agencies. The agency has sent a clear signal to the market: The FTC won’t hesitate to challenge mergers that enable pharmaceutical conglomerates to entrench their monopolies at the expense of consumers and fair competition. Whether the aggressive approach by the agency holds up or not long term is another issue that remains to be seen.



David H. Crean, Ph.D., is Managing Partner for Cardiff Advisory LLC, an M&A investment banking strategic advisory firm focused on the Life Sciences and Healthcare sectors. This article is provided for informational purposes only and does not constitute an offer, invitation, or recommendation to buy, sell, subscribe for or issue any securities.

The principals of Cardiff Advisory LLC are registered representatives of BA Securities, LLC Member FINRA SIPC, located at Four Tower Bridge, 200 Barr Harbor Drive, Suite 400 W. Conshohocken, PA 19428. Cardiff Advisory LLC and BA Securities, LLC are unaffiliated entities. All investment banking services and securities are offered through BA Securities, LLC, Member FINRA SIPC.