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FTC changes premerger notification rules for drug patents

The FTC has issued final changes to the premerger notification rules governing how pharmaceutical companies must report the acquisition of exclusive patent rights to the FTC and the Antitrust Division of the Department of Justice (DOJ)

Under the Hart-Scott-Rodino (HSR) Act, drug companies must report certain mergers and acquisitions of assets, including patents and exclusive patent licences, over a certain amount to the FTC and DOJ. The current threshold is $70.9 million.

The change will revoke the existing “make, use and sell” standard governing which licences are reportable. Under the current rules, companies are only required to report transfers of patent licences if they allow the buyer to develop, manufacture and sell a product without restriction.

Under the new rules, pharmaceutical companies will have to report transfers falling under the scope of the more stringent “all commercially significant rights” test.

According to the FTC, this will mean that “an exclusive license is substantively the same as buying the patent or part of the patent outright, and carries the same potential anticompetitive effects". The FTC claims the “make, use and sell” test is “no longer adequate” because some drugs companies were transferring most but not all of the rights under a licence in order to avoid the reporting requirement.

The FTC received four public comments on the rule, including an objection to it from industry organisation Pharmaceutical Research and Manufacturers of America.

The new rules will take effect 30 days after publication in the Federal Register.

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