Pharmaceutical executives hoping for a friendlier dealmaking environment after the Trump administration takes over the White House may be in for some disappointment, according to one former regulator.
Even after the president-elect is sworn in, the scrutiny applied by the Federal Trade Commission under the Biden administration might not lessen, said David Balto, an antitrust lawyer who was assistant director of policy and evaluation at the FTC in the late 1990s and early 2000s.
In fact, the regulator could even turn up the heat in some areas.
“Anti-corruption enforcers pride themselves on making sure that antitrust is not a political sport, that there aren't significant changes in enforcement when administrations change,” Balto said. “There's an unwritten rule that the new administration continues to pursue whatever is pending at the time. They don't drop litigation or investigations just because of administration changes.”
Balto’s outlook contrasts with expectations of some in the industry, who anticipate the FTC under President Donald Trump will apply less pressure to industry M&A. “With regard to FTC, there’s a good chance that changing leadership there will be a positive for biotech,” Daphne Zohar, CEO of Seaport Therapeutics and formerly the head of PureTech Health, previously told BioPharma Dive in an email.
When the Biden administration transitions out this winter, one of the two current Republican FTC commissioners will likely become interim chair until a permanent replacement is chosen, Balto said.
Under Biden, the FTC has been steered by Lina Khan, who’s attracted significant criticism even as some of the FTC’s actions under her leadership have received bipartisan support. Her term expired in September, but she can stay on until she’s replaced, which is expected soon after Trump assumes office.
Khan’s FTC has more aggressively investigated M&A overall, but has paid close attention to the pharma industry, including Amgen’s $28 billion purchase of Horizon Therapeutics.
FTC regulators have also zeroed in on Novo Holdings’ proposed acquisition of contract manufacturer Catalent, The agency has asked for more details about the $16.5 billion deal, which would give Novo Holdings 50 manufacturing sites that produce small molecules, biologics, and cell and gene therapies.
Those kind of deals might still draw scrutiny. “Typically, people think Republicans don't support vertical merger enforcement, but if they assume that they would be dead wrong,” Balto said. “The current [FTC] brought vertical merger cases on a bipartisan basis. They've gotten significant support from Republican commissioners when they tried to bring cases attacking vertical mergers.”
A PBM crackdown?
The Trump administration may also be more aggressive targeting specific sectors, such as pharmacy benefit managers. Although PBMs argue they play a crucial role keeping drug prices down, they’ve come under fire for appearing to do the opposite. The FTC recently issued a report calling PBMs “powerful middlemen inflating drug costs.”
In September, the FTC sued three major PBMs — Caremark, Express Scripts and Optum — for allegedly jacking up insulin prices to boost profits. The previous Trump administration also made moves to rein in PBMs.
“Seventy million people lost sleep on election night, but the people who lost a lot of sleep are the people who run PBMs,” Balto said. “And the reason for that is that it was the Trump administration that changed the way that federal enforcers and Congress looked at the role of the PBM.”
In particular, the FTC took aim at rebate schemes by eliminating safe harbor protection for the deals under the anti-kickback statute. Enforcement of that final rule, however, was postponed until 2032 after the Congressional Budget Office warned the change would inflate insurance premiums, Balto said.
The incoming Trump administration could revive enforcement. “There are serious storm clouds for PBMs in a new Trump administration,” he said.
Orange book filings
The FTC could also keep its sights trained on companies that improperly list patents in an FDA database commonly called the Orange Book.
According to Balto, this enforcement area fits squarely in line with Republicans’ historic priorities.
“From the Republican perspective, the most egregious form of monopoly power is monopoly power secured through the abuse of the regulatory system,” Balto said. “So, you should see the next administration not only continue Orange Book actions, but also look for the opportunities to bring other actions where pharmaceutical firms are abusing the regulatory process.”
“The Republicans, in some ways, will be even more aggressive against the pharmaceutical industry than the Democrats,” Balto added.
Correction: This story incorrectly described the length of Lina Khan’s term on the FTC. It’s been updated to reflect that her term ended Sept. 25, 2024, although she has continued on the commission.
