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Mergers in Life Sciences

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In recent years, regulators have expanded their theories of potential anticompetitive harm from mergers in the life sciences industry.

Antitrust regulators are assessing the potential for:

  • Reduced future competition among drugs that are currently at early stages of development
  • Foreclosure of competition through bundled rebates
  • Foreclosure of competition by limiting access to licensable technology and R&D
  • Reduction in R&D effort—e.g., killer acquisitions
  • Monopsony power in the labor market for highly specialized R&D personnel

Cornerstone Research and its affiliated experts have a deep understanding of the relevant market structure and the competitive interaction between market participants that allows us to address these issues.

An empirical study of the impact of mergers and acquisitions on pharmaceutical innovation

Authored by Motaz Al-Chanati, Lorenzo Cattivelli, Elaine Guo, Penka Kovacheva, Anand Krishnamurthy, and Maria Salgado

The authors empirically investigate the association between M&As and two measures of innovation that directly impact patients: the likelihood of drug launch overall and the likelihood of novel drug launch. Using data on drug development events and M&As in the pharmaceutical industry, the authors first document a large, positive, and statistically significant association between M&As and their measures of innovation. The study compares the likelihood of launch of (novel) drug projects belonging to small firms when they are acquired by large firms versus when they are acquired by other small firms, and find a higher likelihood of (novel) drug launch in the former group relative to the latter.

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Amgen Inc.’s Acquisition of Horizon Therapeutics plc
Headshot of Darius Lakdawalla Retained by Cravath, Swaine & Moore

The Federal Trade Commission (FTC) filed a lawsuit seeking to block Amgen Inc. (Amgen)’s proposed $28 billion acquisition of Horizon Therapeutics plc (Horizon). The FTC alleged that the acquisition would enable Amgen to leverage its top-selling drugs to foreclose potential future rivals to Horizon’s two rare-disease drugs by offering bundled rebates to payers and pharmacy benefit managers.

Counsel for Amgen retained Darius Lakdawalla of the University of Southern California to analyze the FTC’s claims and assess the analyses of the FTC’s experts. Professor Lakdawalla described the nature of price competition in the pharmaceutical industry and assessed Amgen’s ability and incentives to engage in the alleged leveraging behavior.

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Our Curious Amalgam: How Do We Measure Innovation?

ABA Antitrust Law Section podcast interview with Penka Kovacheva

Dr. Kovacheva spoke with the hosts of the ABA Antitrust Law Section podcast, Our Curious Amalgam, about her recent coauthored article published in Concurrences Competition Law Review, “The impact of pharmaceutical M&A on innovation: Insights from the literature and gaps remaining.”

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Entrenching and Leveraging Market Dominance in the 2023 Merger Guidelines: Insights from Amgen/Horizon
Headshot of Darius Lakdawalla
Headshot of James Lee
Headshot of Ana McDowall
Coauthored by Darius Lakdawalla, Jamie Lee, and Ana McDowall

In an article published by The Antitrust Source, Dr. Lakdawalla with James Lee and Ana McDowall of Cornerstone Research explore relevant factors in the Amgen/Horizon merger challenge as an illustration of the analytical framework for the theory of leveraging market dominance via bundling in the new Merger Guidelines.

The Agencies’ new Merger Guidelines (December 2023) include some novel theories, such as the theory in Guideline 6 of leveraging market dominance in one market into another market by linking the sale of products in the two markets. Guideline 6 does not provide an analytical framework for evaluating competitive harm under this theory of leveraging market dominance into another market.

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The Impact of Pharmaceutical M&A on Innovation
Headshot of Penka Kovacheva Headshot of Maria Salgado
Headshot of Anca Cojoc Headshot of Lorenzo Cattivelli
Coauthored by Penka Kovacheva, Maria Salgado, Anca Cojoc, and Lorenzo Cattivelli

The pharmaceutical industry often uses mergers and acquisitions strategically to strengthen market positions, expand product portfolios, access new technologies, and enhance innovation capabilities. Regulators are increasingly focusing on the impact of pharmaceutical mergers on innovation, with new merger guidelines issued by the U.S. Justice Department and Federal Trade Commission signaling a more expansive scrutiny of mergers.

In an article published by Concurrences Competition Law Review, the authors examine existing academic literature on the impact of pharmaceutical mergers and acquisitions and identify remaining gaps.

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2024 ABA Antitrust in Healthcare Conference
Headshot of James Lee ABA conference panel moderated by James Lee

James Lee moderated a panel of competition experts to discuss “New Competition Theories in Life Sciences Mergers” during a two-day ABA conference in Arlington, VA. Panelists addressed the novel theories of harm that US merger enforcement agencies are using to challenge life science mergers. Speakers discussed these theories, their relevance in recent cases (such as the Amgen/Horizon merger), and economic considerations and analyses to evaluate them.

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