Pharmaceutical Mergers

Transactions in the pharmaceutical industry follow the same process
and are subject to the same rules as transactions in any other industry,
except for transactions involving exclusive licenses. This chapter
discusses the merger review process under the Hart-Scott-Rodino (HSR)
Act, the substantive analysis conducted in connection with merger review,
and remedies for potentially anticompetitive transactions.
A. Merger Review Process
The HSR Act requires parties to a transaction that meet certain
jurisdictional thresholds to file a notification with the Federal Trade
Commission (FTC) and the U.S. Department of Justice (DOJ) and to
observe a preclosing waiting period.1 The HSR Act is a procedural statute
designed to give the U.S. antitrust authorities prior notice of economically
significant transactions and the opportunity to investigate and, if needed,
challenge such transactions prior to their consummation.
The parties to a negotiated transaction are permitted to file their HSR
Notification and Report Forms (HSR Forms) after execution of a letter of
intent, memorandum of understanding, or definitive agreement, as long as
they certify a good faith intention to complete the notified transaction.2
For a transaction in which the acquisition is made from a third party rather
than from the issuer or its “ultimate parent entity”3 (e.g., a tender offer or
open market purchase),4 the acquiring person may file its HSR Form after
it has provided the requisite notice to the target company, and in the case
1. 15 U.S.C. §18a. Although both the DOJ and the F TC have authority t o
review and investigate proposed mergers under the HSR Act, only one of
the agencies will conduct the investigation of a proposed transaction.
Pharmaceutical transactions are typically reviewed in the first instance by
the staff attorneys of the Mergers I Division at the FTC.
4. 16 C.F.R§ 801.30(a).
182 Pharmaceutical Industry Antitrust Handbook
of a tender offer, has also publicly announced its intention to make the
There is no deadline for submitting the HSR Forms, but the parties are
prohibited from closing the transaction until the statutory waiting period
ends. For negotiated transactions, the waiting period begins to run once
each party to the transaction has submitted completed HSR Forms and
required documentary attachments. 6 In the case of a nonnegotiated
transaction, the waiting period begins after the acquiring party submits its
completed HSR Form.7 The acquiring person must pay a filing fee to the
FTC, the amount of which is based upon the value of the reported
transaction.8 Fee splits (or shifts) can be negotiated contractually by the
parties. Submission of the HSR Forms is not deemed to be complete until
the full amount of the required fee has been received.
The FTC’s Premerger Notification Office (PNO) typically determines
within a few days after filing whether the HSR Forms are complete. If the
PNO finds a material omission or error in the filing, it may require the
resubmission of corrected data or documents, as appropriate, and the
recertification of the HSR Form. If recertification is required, the waiting
period will begin anew after the PNO receives the updated materials and
a new certification.9 If the waiting period associated with a transaction is
not extended, it expires at 11:59 p.m. (Eastern) on the thirtieth calendar
day following the submission of the HSR Forms, or on the 15th calendar
day following the submission of the HSR Forms for all cash tender offers
and acquisitions of assets from sellers involved in bankruptcy
proceedings.10 If the final day of the waiting period falls on a Saturday,
Sunday, or a holiday, however, the waiting period will end on the next
regular business day.11
The waiting period may be shortened if the DOJ and FTC decide not
to take further action, and at least one of the filing parties requests “early
termination.”12 The expiration of the waiting period or the grant of early
5. 16 C.F.R §803.5(a).
6. 15 U.S.C. § 18a(b)(1)(A); 16 C.F.R. §803.10(a).
7. 15 U.S.C. § 18a(b)(1)(A); 16 C.F.R. §803.10(a).
9. 16 C.F.R. § 803.10(c)(2).
10. 15 U.S.C. § 18a(b)(1)(B); 16 C.F.R. § 803.10(b)(1).
11. 16 C.F.R. § 803.10(b)(3).
12. See Formal Int. No. 13, Concerning Early Termination of the Waiting
Period Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(Aug. 20, 1982), available at premerger-
notification-program/statut e-rules-and-for mal-interpretations/ for mal-9.
Pharmaceutical Mergers 183
termination, however, does not bar the agencies from subsequently
investigating the transaction and taking appropriate enforcement action.
Conversely, if FTC or DOJ staff has lingering concerns at the end of
the initial waiting period about the effect(s) the transaction may have on
competition, either agency can extend the waiting period by issuing a
request for additional information and documentary materials (commonly
referred to as a “Second Request”).13 A Second Request is essentially a
broad civil subpoena that requires an extensive production of documents
from the companies’ files and production of a wide range of data.14 The
issuance of a Second Request extends the waiting period during which the
parties are prohibited from closing the transaction. The waiting period is
extended until 30 days after certification of substantial compliance with
the Second Request, or ten days from compliance by the acquiring party
in the case of an all-cash tender offer or the acquisition of assets from a
seller involved in a bankruptcy proceeding.15 The reviewing agency will
decide by the end of the waiting period whether to challenge the
transaction in court (unless the parties agree to extend the waiting period).
1. Applicability of the HSR Act
The FTC has promulgated rules to implement the HSR Act, which are
contained in 16 C.F.R. Parts 801-803. The application of the HSR Act to
a particular transaction requires careful consideration of the HSR Act,
rules, and FTC formal and informal interpretations, as well as the
particular factual circumstances of the transaction.
The HSR Act can apply to almost any form of acquisition transaction,
including a merger, consolidation, tender offer, asset acquisition, private
purchase, or other acquisition of voting securities. The HSR Act also can
apply to certain joint venture formation transactions.16 Even transactions
concerning only a subset of an entity’s assets or voting securities may be
subject to the Act. The HSR Act does not apply to acquisitions of debt
instruments or other acquisitions of securities that do not presently carry
13. 16 C.F.R. §803.20.
15. 16 C.F.R. §803.20(c).
16. Id. §§ 801.40, 801.50.

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT