THE “BIG PHARMA” CAN ACCELERATE MERGER CONSIDERATION BY USE OF WAIVERS

18-03-2020 | 16:01

Confidentiality waivers in the course of merger consideration by antimonopoly bodies are becoming an important tool of international cooperation

 

On 13 March 2020, NationalResearchUniversity - Higher School of Economics hosted the 9th meeting of BRICS Working Group on “Approaches of competition authorities to global mergers: how to react jointly to the challenges of increasing global oligopoly in the pharmaceuticals”. The event was organized by FAS, Higher School of Economics and BRICS International Center of Competition Law and Policy (further on referred to as BRICS Antimonopoly Centre).

 

“A lot of mergers between pharmaceutical companies of various levels and scale have taken place in the pharmaceutical industry recently. Their revenue reached dozens of billion dollars. Several large mergers are expected in 2020. Such intensification of the efforts taken by pharmaceutical giants requires careful government regulation and merger control, in order to evaluate their consequences for the economy in general and for consumers in particular”, pointed out Deputy Head of FAS Pavel Zaborschikov.

 

Considering global mergers, FAS is guided by its framework of cooperation agreements, which include more than 50 various documents.

 

Head of FAS Department for International Economic Cooperation, Lesya Davydova, emphasized: “When markets are getting global, international cooperation also should become global, including merger consideration. It will facilitate practically simultaneous decision-making and efficient use of resources, prevent information asymmetry and contradictory orders, and shorten the time line for merger consideration”.

 

Waivers – voluntary refusals of companies from confidentiality of information and documentation submitted to antimonopoly bodies – play an important role in cooperation between competition authorities in the course of global merger analysis and consideration.

 

“Economic entities involved in mergers give their permission to exchange confidential information, clearly specifying the scope of data that antimonopoly bodies are allowed to exchange. Companies themselves are interested in granting this right for cooperation because it shortens the time taken to consider mergers and duplicative enquiries from antimonopoly bodies are avoided”, added Lesya Davydova.

 

According to Nadezhda Sharavskaya, Deputy Head of FAS Department for Control over Social Sphere and Trade, global mergers must be considered by competition authorities in close collaboration, which will help develop common approaches to decision-making, avoid contradictions and tighten control over execution of orders issued by jurisdictions.

 

Alexei Ivanov, who is Director of the Institute of Law and Development, Higher School of Economics – Skolkovo, and Director of BRICS Antimonopoly Centre, pointed out: “A clear trend is observed on the market of medicinal drugs towards deteriorating the quality of innovative efforts of large pharmaceutical companies. They “swallow” more and more independent projects, and often do this to kill competitors rather than commercialize products – the so-called “killer acquisitions” – maintaining their own rent-seeking business model and blocking entry of breakthrough solutions on the market. In-house R&D accounts for only 10 – 20 % innovations of the “Big Pharma”, otherwise they rely on achievements of public research institutes and small dynamic companies. On the one hand, research centres should not be deprived of a possibility to sell their results to the “Big Pharma”, on the other – we must not allow market “cleansing” by the dominant players who buy up and close-out potentially competitive breakthrough solutions. To this purpose, approaches of antimonopoly authorities to merger assessment should be altered considerably. The institution for control over economic concentration is getting increasingly essential amidst rapid technological changes: instead of separate markets, the most forward-thinking agencies tend to increasingly focus on innovative industry development in general and use antimonopoly remedies accordingly to prevent eliminating potential competition and blocking alternative technologies, which compete with the “Big Pharma” business”.

 

Director of Antimonopoly Regulation Department of the Eurasian Economic Commission, Alexei Sushkevich, and experts of competition authorities from Italy, South Africa, Brazil, India, Sweden also took part in the discussion. Some of the colleagues joined the event online.



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