Killers Interrupted: Stopping Pharmaceutical Killer Acquisitions via IP Release Clause

Pharmaceutical innovation relies on pharmaceutical firms’ ability to acquire promising new molecules and the biotech firms that discovered them. Such nascent competitor acquisitions allow the pharmaceutical industry to efficiently finance the risky drug development process. But they also enable “killer acquisitions,” where incumbents purchase startups and discontinue their promising drug projects to protect existing products. This practice threatens innovation, and therefore public health, by allowing incumbents to build and entrench market power. Current antitrust measures, such as blanket bans on nascent acquisitions and compulsory licensure of acquired technology, fail to distinguish between legitimate acquisitions and their killer doppelgangers. This paper proposes IP release clauses as a solution. These clauses would require incumbents to develop acquired intellectual property (IP) within set timelines or lose control through licensing or auction. By leveraging existing antitrust authorities and the repeat game nature of antitrust review, IP release clauses preserve the pharmaceutical industry’s two-stage development model while targeting killer acquisitions. This tailored approach allows regulators to combat anti-competitive behavior with minimal impact on the pharmaceutical industry’s research and development model.