The U.S. antitrust laws were written at a time when economic competition and markets were largely national. Today, the United States faces the need to enforce antitrust regulations in a world dominated by large, multinational companies, which compete in multiple geographic markets with the same products.(1) As a result, there has been considerable discussion about the extraterritorial application of antitrust laws and the harmonization of competition laws globally.(2) Because the merits and process of harmonization and convergence of laws have been argued and debated at length by others, this Note will not directly comment on these issues. Instead, this Note focuses on the effect of increased cooperation between the United States (U.S.) and European Union (EU) competition (antitrust) enforcement authorities in regulating mergers in the pharmaceutical industry.
The pharmaceutical industry has been in the midst of significant consolidation over the past ten years and thus provides an excellent framework for considering the effects of bilateral competition enforcement agreements and other non-formal relations between EU and U.S. competition authorities. The continued globalization in the pharmaceutical industry, running parallel to these efforts to foster cooperation, has placed merger review in the pharmaceutical industry in the unique position of acting as a barometer of the relationship between the EU and U.S. competition enforcement authorities and possibly as an indicator of what is to come. This Note will argue that there has been an increasing trend towards greater cooperation between the agencies, in particular towards cooperative efforts to develop complementary outcomes and remedies imposed on mergers in the pharmaceutical industry.
This Note is divided into four parts. Part I examines the forces behind the recent wave of cross-border mergers and acquisitions in the pharmaceutical industry. Part II provides a comparative analysis of U.S. and EU merger enforcement, both substantive and procedural, focusing on those areas most relevant to pharmaceutical industry mergers. Part III analyzes briefly both the rhetoric of cooperation and the emergence of cooperation agreements over the last decade. Finally, Part IV focuses on five specific pharmaceutical industry mergers reviewed by both the U.S. and EU authorities; compares the findings; and suggests that while there has been cooperation between the regimes throughout, there is a rising chance of complementary results aimed at preserving the efficiencies motivating the mergers. The conclusion suggests possible reasons for the more recent tendency of the reviewing authorities to formulate complementary results.
I. THE PHARMACEUTICAL INDUSTRY--RIPE FOR ENFORCEMENT?
The pharmaceutical industry has witnessed increasing and dramatic change over the past fifteen years--both domestically and internationally--with rapid growth in sales of prescription drugs in the United States.(3) While domestic changes in the U.S. pharmaceutical market are an important consideration and form a key component of this analysis, the focus herein falls specifically on the global pharmaceutical market, the structural and institutional changes in that market, and the merger wave of the past five years that has been the result of these changes.(4)
As Roy Levy of the Federal Trade Commission ("FTC") explained in a March 1999 report, "the ... pharmaceutical industry has experienced significant horizontal consolidation in the form of acquisitions and mergers of drug companies, particularly since 1994."(5) This has largely resulted from four independent, yet interrelated, factors: (1) increased external pressure on pharmaceutical companies to become more efficient, reduce the rate of price increases, and cut costs; (2) increased competition resulting from a rising number of patent expirations, as well as from lower barriers to entry for generic drug companies; (3) a need for pharmaceutical companies to reduce production costs by eliminating excess sales personnel and to achieve economies of scale and rationalize operations in marketing and research and development efforts; and (4) globalization and companies' perceived need to increase their size to compete. …