All questions

Merger control

The Competition Act defines a 'merger' broadly to include a direct or indirect acquisition or establishment of 'control over or significant interest in' all or part of a business by any means, including an acquisition of shares or assets, amalgamation or combination.43 Notably, this definition is not limited to Canadian businesses, and therefore foreign transactions involving Canadian entities may trigger review by the Bureau.

The Competition Act contains both substantive merger provisions and pre-merger notification provisions, which apply independently of each other. Even if a transaction raises no substantive competition issues, if it meets certain prescribed financial and (in the case of share acquisitions) ownership thresholds, parties must comply with the filing and waiting period requirements of the pre-merger notification provisions. Conversely, a merger that is not subject to the notification requirements may still be reviewed, and possibly challenged if it raises a substantive competition issue.

While most pharmaceutical mergers have been cleared with no objection, there have been a few notable transactions that received Bureau scrutiny and highlighted the Bureau's approach to determining product and geographic markets in the pharmaceutical sector. This approach has included looking at disease prevalence, competitor sophistication in managing regulatory requirements, and drug substitutability based on properties that influence efficacy and administration, such as dosage form and molecular characteristics. For example, in April 2016, the Bureau ordered divestitures in connection with a proposed transaction between two global generic drug manufacturers, as there were very few generic alternatives in the relevant treatment markets (cystic fibrosis and opioid dependence).44 During the review process, the Bureau consulted confidentially with competing drug developers to understand the status of their drug approval processes (as this is non-public information), the anticipated timing of their entry, and their chances of success based on their experience with regulatory approvals. Similarly, a more recent merger proposal in 2020 between two global animal health product suppliers ended in a consent agreement requiring divestitures. While the transaction concerned veterinary health, the factors the Bureau considered (e.g., pricing negotiations, costs, timelines of drug development) are also applicable to human pharmaceutical products.45

Due to the global nature of the pharmaceutical industry, the Bureau may rely on foreign antitrust regulators' assessment or conditions imposed when evaluating the Canadian dimensions of a transaction. This was the case in a 2015 review of a transaction between three global pharmaceutical companies, where the Bureau worked closely with its US and European counterparts, and allowed the transaction to proceed in Canada on the basis of a US consent agreement.46 The Bureau recently joined an international working group with the US, UK and EU competition authorities dedicated to developing and harmonising approaches to pharmaceutical merger review in light of the rapidly changing drug development and manufacturing strategies, which should result in further streamlining and harmonisation of the enforcement approach. Factors the working group will consider include the impact of mergers on pharmaceutical innovation, the types of evidence required for review, and revisiting the current theories of anticompetitive harm in the context of the pharmaceutical industry.47

In addition to the merger control regime, acquisitions of control of Canadian businesses by foreign purchasers will attract the Canadian foreign investment regime, which contains both economic net benefit and national security provisions. During the pandemic, the Canadian government increased its scrutiny of foreign investments in the pharmaceutical industry and other critical sectors impacting the health and safety of Canadians, in an effort to protect domestic access to essential goods and to onshore Canadian manufacturing and supply.48

Anticompetitive behaviour

Potentially anticompetitive behaviour in any industry, including the pharmaceutical sector, may be reviewed under a number of civil reviewable provisions of the Competition Act, with abuse of dominance being among the most frequently used. While the mere exercise of IP rights is not, in itself, anticompetitive, the Competition Act could be engaged if certain behaviours stemming from IP ownership result in a substantial prevention or lessening of competition. Over the years, the Bureau has conducted a number of investigations into various pharmaceutical practices, starting with the public investigation in 2012 of a pharmaceutical company that swapped its prescription drug treatment of conjunctivitis that was nearing the end of its patent for a second generation formulation of the same drug that would be protected under a new patent for another 10 years, (a practice known as 'product switching' or 'product hopping')49. Soon after the Bureau began its investigation, the company resumed supply of its original drug and the Bureau discontinued its investigation in 2014.50

Since then, the Bureau has also looked into a number of other practices, including patent settlement agreements between originator and generic competitors that would delay generic entry (a practice known as 'pay for delay'), supplying a drug indicated for multiple conditions for free or near-free prices to patients and hospitals, offering increased rebates to public and private insurers following the market entry of the biosimilar and refusal by originator companies to supply the generic manufacturer with samples of the CRP, required to conduct bioequivalence testing, resulting in the delay of the biosimilar's market entry. The Bureau discontinued many of these investigations upon concluding that the required elements of an abuse of dominance were not met or due to a discontinuance of the conduct. The Bureau's published position statements have provided many useful insights into its analytical approach in this area, including a strongly worded public statement in 2020 in connection with its investigations into a refusal to provide CRPs. The Bureau indicated it would not tolerate such conduct and would be prepared to conduct further enforcement action seeking an order for financial penalties (violations of abuse of dominance provisions are subject to administrative monetary penalties of up to C$10 million for a first order, and C$15 million for a subsequent order).51

Finally, the Bureau has also addressed off-label usage of vaccines and therapies.52 In 2019, the Bureau initiated an investigation into a vaccine manufacturer's attempt to restrict the off-label use of its vaccine in a procurement contract for a provincial public immunisation programme, which would have restricted public health authorities' ability to reduce the dosage (and therefore supply) of the vaccine, or to use it in combination with a competitor product. While the vaccine manufacturer did not ultimately impose these restrictions, the Bureau stated its intention to take appropriate actions in the event a manufacturer attempts similar conduct in the future.53