Since President Joe Biden signed an Executive Order to promote competition in the U.S. economy—and in doing so specifically targeted the biopharma sector—most industry watchers have envisioned an emboldened Federal Trade Commission flexing its muscles against pharma M&A efforts.
Possible case in point: Merck’s much-anticipated merger with Seagen.
But one expert says Merck and Seagen shouldn’t be deterred. Michael Abrams, who consults healthcare companies on M&A deals, said in an interview that the FTC does not have any more legal juice to block M&A deals than it has had in the past.
Abrams, a managing partner at St. Louis-based Numerof & Associates, points to the Multinational Pharmaceutical Merger Tax Force, an FTC working group that was designed to connect the dots between big pharma consolidation and rising drug prices. Abrams says the group failed to demonstrate the linkage.
“It took place in a data-free zone. I don’t think they can establish a data-based causal relationship between company size and drug prices,” Abrams said. “I’m not sure that I’d put a lot of importance on that meeting except as a matter of political theater.”
The price tag for the Merck-Seagen acquisition could add up to more than $40 billion, people familiar with the matter told The Wall Street Journal earlier this month. It would be the largest such deal in the pharma industry since AbbVie’s $63 billion acquisition of Allergan in 2019. The FTC signed off on that deal after forcing Allergan to sell off three of its drugs.
Abrams envisions the government watchdog imposing similar requirements on a Merck-Seagen deal. The FTC has typically examined pharma mergers from the standpoint of trying to prevent product overlaps, and there are some between the companies.
Abrams says there’s not much the FTC can do beyond that. “The FTC is interested in only taking on fights it can win,” he added. “But it has a substantial checkbook when it comes to making life miserable in legal proceedings for parties that want to merge. And rather than go down that route, the parties here might be willing to make those concessions.”
Last month, when the FTC required the owner of a chain of veterinary clinics, JAB Consumer Partners, to undergo massive divestitures to complete a pair of $1 billion-plus acquisitions of competitors, some saw it as an ominous sign for future M&A deals.
Commenting on JAB's acquisitions, Bill Whelan, a lawyer for life sciences company M&A for Mintz, said in an interview, that typically, this kind of private equity sponsored roll up transaction has not been targeted. “That was a new twist on antitrust enforcement.”
But increased scrutiny doesn’t necessarily add up to more power for the FTC, Abrams contends. He says the organization is under lots of pressure, some of it self-imposed. With the change in the administration, the reconstituted FTC is anxious to make a statement. But does it have teeth?
“They are under scrutiny to put up or shut up. But I don’t think the fundamental ideas that are behind their concerns about large mergers are gonna hold up if push comes to shove in court,” Abrams said. “The FTC’s mandate is not to drive down drug prices. Their mandate is to prevent anti-competitive activity.”