NADEZHDA SHARAVSKAYA ABOUT EXPANDING GLOBAL MERGERS ON THE PHARMACEUTICAL MARKET
Representatives of competition authorities discussed approaches to considering global mergers and acquisitions on the pharmaceutical market
The 9th meeting of BRICS Working Group for studying competition on the pharmaceutical markets took place in Moscow. The key item on the event agenda was the challenges caused by an increasing global oligopolization of the pharmaceutical sector. In 2019, the overall investments in mergers and acquisitionsin the medical-and-biological field reached US$ 357 billion1. The bulk of them were the “Big Pharma” deals due to patent expiry and the need to expand product portfolio.
Nadezhda Sharavskaya, Deputy Head of FAS Department for Control over Social Sphere and Trade, said: “We are convinced that global mergers must be considered by competition authorities in close cooperation. It will enable to develop a common approach to decision-making, avoid contradictions and increase control over execution of warnings issued by particular jurisdictions. Moreover, the value of antimonopoly collaboration is in providing equal access to information by jurisdictions considering international mergers and prompt information exchange”.
As an example, Deputy Head of FAS Department for Control over Social Sphere and Trade mentioned a merger between BMS (Britsol-Myers Squibb) and Celgene. FAS approved it but issued an order which, in particular, required BMS to ensure execution of all contracts concluded by Celgene for supply of its medicinal drugs that have no analogues on the Russian market. At the same time, the US Federal Trade Commission approved the merger under the condition that Celgene sells the right for one of the drugs to another legal entity.
“As a result, BMS was unable to execute the order given by the antimonopoly body”, explains Nadezhda Sharavskaya. “Here we should give credit to the companies that undertook measures to regulate the situation. That is why I would like to once again emphasize the importance of close cooperation between competition authorities”.
Deputy Head of FAS Department for Control over Social Sphere and Trade described the practice of the antimonopoly authority on considering global mergers on the pharmaceutical market.
“Our main task when considering such mergers is to prevent restriction of competition”, informs Deputy Head of FAS Department for Control over Social Sphere and Trade. “Therefore, to make decisions, we conduct prospective economic analysis and identify a possibility to substitute the drugs covered by a merger, the composition of economic entities and their shares on the market within the boundaries of the Russian Federation”.
For instance, in 2018-2019 the Antimonopoly Service approved 16 mergers, giving orders for 11 of them.
There are two types of orders in the antimonopoly practice: conduct and structural. Conduct conditions are issued when a merger does not impact the companies’ market share but the merger parties have high shares on the market of some medicinal drugs prior to completing the merger. Structural conditions are issued if the buyer and the target company and their groups of persons cross over within the same geographic and product boundaries.
The speaker also outlined FAS legislative initiatives designed to improve antimonopoly regulation: the Antimonopoly Compliance Act that came into effect on 12 March 2020 and the “fifth antimonopoly package”. The latter modernizes control over global mergers. In particular, it introduces new possibilities in merger control such as: reviewing merger approval criteria, extending the merger consideration period, engaging experts and choosing the trustees to control execution of orders, etc.
Reference:
1 2020 EY M&A Firepower report.