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James Keyte opened the panel, posing the question: Is there a transatlantic divide in antitrust and life sciences?. He noted that both the European Union and United States are focused on market power and believe in the use of economic analysis in assessing issues such as mergers, dominance, and conduct. However, the EU has a tradition of distrust over concentration, even when achieved organically, which Keyte believes has implications on enforcement policy. He also noted that one of the largest gaps in the EU/US divide is the EU’s concern with leveraging power from one market to another, even if such conduct just distorts competition. In the US, in light of Trinko, if there is any form of leveraging, it has to violate the statute in the second market. He concluded his remarks by characterizing the EU’s approach to antitrust as a means to “level the playing field,” in contrast to the US’s approach, which he described to accommodate a more “rough and tumble game in antitrust.”
Panel Discussion: Moderator Loren Smith opened the discussion by asking the panelist if they view killer acquisitions as an important issue in the life sciences. Noah Joshua Phillips responded by first defining “killer acquisitions” as the scenario in which an acquiring company has a product that the target company has in development; however, as a result of the merger, the development ceases to happen. He noted that the US has had the opportunity to see the development of drugs and the movements they are making to market in the context of the regulatory process. The US has been able to observe acquisitions that result in a drug failing to make it to the market, which poses concern. While there is always speculation involved in the development of a drug, M&A should not result in the cancellation of nascent competition in any way. Because of this, there is a lot of focus on this issue both outside and within the life sciences, and by enforcement agencies. Paul Csiszár agreed with Phillip’s definition of “killer acquisition” and added that, in the life sciences and pharma, the focus should be on pipeline development. He described how they must consider how these firms view each other’s pipelines, and whether they expect to have competition after marketing authorizations. Then, the issue arises of there being potentially changed incentives of the merged entity to fund the pipeline in post-merger the same way as they would have done it in the absence of the merger. Csiszár noted that from 2015 on, the EU objected in many Phase I merger review cases and the merging parties almost always successfully managed to divest the pipeline to a suitable buyer who continued to develop the pipeline.
Smith then asked the panelists for their views on the proposition that interfering with killer acquisitions may stifle innovation. Phillips began by acknowledging that M&A is a very important off-ramp for companies, both in the life sciences and elsewhere. He believes that maintaining M&A as an exit option is important for supporting the benefits that come from innovation in the life sciences. The trick, he believes, is to think about evidence in a way that allows for a focus on deals that are more likely to be anticompetitive. The difficulty comes in trying to find a balance in rooting out anticompetitive conduct, while still allowing markets to function and maintaining innovation and growth. Csiszár agreed, saying that stifling incentives is not a good approach in life sciences. He added that it is important to maintain the proper incentives in the life sciences, whether it is through encouraging M&A, R&D or objecting to pay-for-delay arrangements or charging ”excessive prices” for off-patent drugs, the latter of two incentivising firms to step up their R&D as their margins shrink as a result of the competition authority’s intervention.