The first half of 2025 has seen an acceleration of M&A activity, including large-scale life sciences transactions, such as Merck’s $3.9 billion acquisition of SpringWorks, Sanofi’s $9.5 billion acquisition of Blueprint Medicines, and Johnson & Johnson’s $14.6 billion acquisition of Intra-Cellular Therapies, as well as notable developments in litigation and enforcement by European and UK regulators. As discussed in this update, these outcomes can provide important guidance for life sciences companies as they structure their transactional and regulatory activity.
Pomalyst Decision Holds Most-Favored-Entry Clause Survives Antitrust Scrutiny, Charting Clearer Path for Structuring Pharma Settlements
In a notable ruling, the U.S. District Court for the Southern District of New York held in Pomalyst1 that a most-favored-entry (MFE) clause in a Hatch-Waxman patent settlement did not, on its face, violate federal antitrust laws. Although private plaintiffs have challenged such provisions in recent years as anticompetitive under reverse payment and horizontal conspiracy theories, the Pomalyst court declined to treat the MFE clauses as inherently suspect, instead focusing on the broader settlement context and the absence of exclusive licenses or “no authorized generic” (no-AG) terms.
After the court’s decision, the Pomalyst plaintiffs filed an amended complaint that dropped all MFE-related claims. A parallel lawsuit by Cigna adopted the same approach. These developments underscore that MFE clauses — when structured carefully — can withstand antitrust scrutiny while remaining a key component of pharmaceutical patent settlements.
Background: Antitrust Litigation Involving MFEs in Hatch-Waxman Settlements
MFE clauses — also called “acceleration clauses” — in patent settlements generally allow a generic manufacturer to enter the market earlier than agreed if certain triggering events occur, such as another generic launch or the invalidation of relevant patents. Another variant, the most-favored-entry-plus (MFEP) clause, generally provides that the brand manufacturer will not grant a license to any second filer until a defined period after the first filer enters the market (for example, when the settling generic is a first filer with 180-day regulatory exclusivity rights).
These provisions have long been a common — and until recently, unchallenged — feature of Hatch-Waxman settlements. However, in the last five years, plaintiffs have increasingly challenged such provisions under the Sherman Act, alleging that they are used as “cartel enforcement” mechanisms to maintain brand monopolies and deter further patent challenges.
For example, in In re Xyrem (Sodium Oxybate) Antitrust Litigation,2 the District Court for the Northern District of California denied defendants’ motion to dismiss, holding that MFE clauses could be anticompetitive. There, Jazz Pharmaceuticals had settled with four generic challengers to its narcolepsy drug Xyrem. Key settlement provisions included:
- A 180-day exclusive license for Hikma, the first-to-file generic, with Jazz agreeing not to license its AG through any other third party during this window (allegedly an implicit “no-AG” agreement).
- Standard MFEs allowing the other generics to launch early if Hikma’s exclusivity was disrupted.
In its motion to dismiss ruling, the court found that the plaintiffs had plausibly alleged that the settlement structure in Xyrem discouraged additional generic entry and deterred further patent challenges. It reasoned that any new challenger — regardless of the strength of its invalidity arguments — would face immediate competition not only from the brand (Jazz) but also from the four previously settling generics, each of which held MFE rights. This allegedly created a powerful disincentive to litigation, functioning as what the court described as a de facto “cartel enforcement” mechanism. The court further explained that the MFE clauses reinforced this effect by enabling all settling generics to launch simultaneously if just one company resumed efforts to market its product. As a result, no single generic had an incentive to break ranks, further deterring competitive entry.
After discovery, the court denied defendants’ motion for summary judgment, finding that plaintiffs had put forth sufficient evidence of a conspiracy for the claims to proceed to trial.3 In support of its ruling, the court emphasized three key facts that companies should bear in mind when considering entering into patent litigation settlements with MFEs:
- Multiple generic challengers abandoned their patent litigation shortly after Jazz settled with Hikma, the first filer.
- Jazz revised its revenue forecasts upward following the Hikma settlement, anticipating higher royalties if it could successfully keep other generics off the market — and later projected stable generic pricing after settling with the remaining non–first filers.
- Jazz worked to keep the settling generics aligned by improving its internal ability to explain the implications of each settlement to the others — described in internal documents as becoming “increasingly skilled in [its] ability to explain” the terms.4
Pomalyst Decision and Related Cigna Lawsuit
Earlier this year, the Southern District of New York issued its ruling in Pomalyst that granted a motion to dismiss in favor of Bristol Myers’ Celgene subsidiary, departing from Xyrem and its progeny. On a motion to dismiss, the court considered a series of settlement agreements that Celgene began entering into in 2020 regarding challenges to the patent protecting its brand product Pomalyst, a multiple myeloma medication. Celgene had entered into agreements with three companies that were all considered first filers under the Hatch-Waxman framework.5 Each of the challenged agreements had not just an MFE provision but an alleged MFEP provision that purportedly coordinated entry dates among the three first-filer companies. However, unlike the settlement agreement in Xyrem, Celgene did not promise that it would not license its own AG to another third-party.
In its ruling, the Pomalyst court distinguished the case from Xyrem and noted several crucial factual differences:
- In Pomalyst, the MFEP provisions were granted equally to all three first-filer companies.
- Unlike in Xyrem, where there was an alleged implicit “no-AG” agreement during the exclusivity period, in Pomalyst, there was no “no-AG” agreement promising an exclusive generic license.
- The court rejected the plaintiffs’ argument that the alleged MFEP provision, standing alone, constituted an unlawful reverse payment. It underscored that “other courts have found that an acceleration clause may trigger antitrust scrutiny only when alleged as ‘part of’ an otherwise unlawful reverse payment” and that the plaintiffs had failed to do so.6
The plaintiffs responded to the motion to dismiss ruling by filing an amended complaint7 on June 27 that dropped the MFE-based reverse payment claims entirely. A related action filed by Cigna against Celgene used nearly identical language, also omitting MFE allegations.8
Key Takeaways and Best Practices for MFEs
By dismissing a claim on a motion to dismiss that an MFE clause violated federal antitrust laws, the Pomalyst decision has charted a path out of Xyrem. Counsel assessing their risk of inviting antitrust scrutiny through a settlement should consider the factors the court found distinguishing in the Pomalyst case, such as the number of settling generic companies receiving preferential treatment, whether there is a potentially impermissible no-AG agreement attached, and whether the MFE is directly tied to another suspect transfer of value from the brand to the settling generic.
Landmark Pharma Disparagement Cases Set EU and UK Enforcement Precedents
In a first for the sector, UK and EU competition regulators have taken coordinated action against disparagement as a stand-alone abuse of dominance.
In May 2025, the UK’s Competition and Markets Authority (CMA) issued its final decision following a year-long investigation into Vifor Pharma for allegedly running a misleading campaign questioning the safety of rival Pharmacosmos’ intravenous iron product, Monofer.9 Without admitting wrongdoing, Vifor agreed to a comprehensive set of commitments including a £23 million payment to the UK’s National Health Service (NHS) as redress and a multichannel communications campaign to correct potentially misleading claims about Monofer’s safety. A confidential private settlement between Pharmacosmos and Vifor was reached in February 2024.
Earlier in July 2024, the European Commission accepted binding commitments from Vifor to resolve similar disparagement concerns across nine EU Member States through a comprehensive decade-long remedial framework including communications campaigns, strict limitations on external communications about the competitor’s safety profile, and the monitoring of safeguards overseen by an independent trustee.
Together, these enforcement actions set a clear and important precedent for pharma companies: systematic, misleading safety claims against competitors can breach competition law, even without pricing abuse. The cases underscore heightened regulatory focus on “exclusionary disparagement” as growing concern — when dominant firms deploy comparative safety messaging to healthcare professionals to undermine rivals and restrict market access.
UK Merger Control Overhaul: New Thresholds and Faster Reviews
As we previously reported in our 2024 year in review, the UK Digital Markets, Competition and Consumers Act 2024 (DMCC Act), effective January 1, 2025, significantly expands the CMA’s merger control powers, especially over deals involving early-stage or pre-revenue targets common in the life sciences space.
A new hybrid jurisdictional threshold now captures acquisitions by large incumbents (with UK revenue over £350 million and at least 33% market share) of smaller targets with a UK nexus — even if those targets have no UK revenue.10 This targets potential “killer acquisitions,” in which incumbents buy emerging competitors to neutralize innovation threats. While the CMA has previously relied on a broad interpretation of the “share of supply test” to assert jurisdiction in these cases — most notably in its review of Roche’s acquisition of Spark Therapeutics — the DMCC Act now gives the CMA a firmer legal footing to intervene.
Alongside this, the CMA has launched a reform program focusing on four strategic priorities in the execution of its merger control powers: pace, predictability, proportionality, and process. Key targets include completing prenotification within 40 working days (against a current average of 65), with a 25–working day goal for straightforward Phase 1 reviews. Upcoming guidance on “material influence” and “share of supply” plus a formal review of its remedies framework will further clarify enforcement. The CMA’s newly published “Mergers Charter” sets clearer expectations for engagement with merging parties, signaling a broader shift toward a more pragmatic and growth-friendly CMA approach.
Court of Appeal Backs CMA on Excessive Drug Pricing — £51.9M Fine Reinstated
In a significant UK competition enforcement ruling, the Court of Appeal has upheld the CMA’s landmark excessive pricing decision against Advanz Pharma and its former private equity owners, Cinven and HgCapital, confirming a £51.9 million fine for abuse of dominance related to liothyronine, a thyroid hormone drug.11
The Court’s May 2025 ruling affirms the CMA’s use of a “cost-plus” pricing test to assess excessive pricing, rejecting arguments that prices should be judged against levels seen under “workable competition.” It also reverses a previous fine reduction by the Competition Appeal Tribunal (CAT).
The case follows an investigation concluding that liothyronine’s price rose by over 1,100% between 2009 and 2017, with no corresponding rise in production costs or evidence of innovation. The CMA found NHS spending on the drug surged from more than £2.3 million to more than £30 million annually during this period. While the CAT upheld the CMA’s findings in 2023, it had reduced fines imposed on Cinven and HgCapital.
This judgment strengthens the CMA’s hand in policing pharma pricing abuses and sets a key precedent for how excessive pricing will be assessed in the UK post-Brexit.
EU Sharpens Focus on Foreign Subsidies — Pharma on Notice
Earlier this month, EU Competition Commissioner Teresa Ribera signaled a more assertive enforcement stance under the Foreign Subsidies Regulation (FSR). The Commissioner announced increased scrutiny across a range of sectors, including life sciences.
In force since January 2023 (fully effective October 2023), the FSR gives the European Commission powers to review foreign state support in M&A deals and public procurement. Notifications are mandatory for qualifying transactions, and the Commission can also launch ex officio probes into suspected distortions.
The first test case came in May, when the European Commission conditionally cleared e&’s acquisition of PPF Telecom, following a deep dive into financial contributions from the United Arab Emirates government. The deal was cleared with behavioral remedies to address potential distortions, setting a clear signal: foreign state-backed buyers face real hurdles under the FSR.
For pharma and biotech players, especially those with state-linked investors or global procurement activity, early FSR risk assessment is now essential — alongside merger control and foreign direct investment reviews.
Read our takeaways from the e&/PPF decision to help navigate this evolving regime.
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We would like to thank former Goodwin & Procter LLP associate Nick Hatcher for his assistance with this insight.
[1] No. 23-7871, 2025 WL 1056668 (S.D.N.Y. Apr. 8, 2025).
[2] 555 F. Supp. 3d 829 (N.D. Cal. 2021).
[3] 2024 WL 4023561 (N.D. Cal. Aug. 26, 2024).
[4] Id. at *3.
[5] The plaintiffs alleged that the first filers’ agreements to delay generic entry into the Pomalyst market was an unlawful reverse payment in exchange for “protected” monopoly profits — via volume-limited, royalty-free licenses and MFE clauses — in the market for the generic version of another Celgene product, Revlimid.
[6] Pomalyst, 2025 WL 1056668, at *33 (emphasis in original).
[7] “Plaintiffs’ Brief in Support of Their Motion for Leave to File the Second Amended Complaint,” La. Health Serv. & Indem. Co. v. Celgene Corp., No. 23-7871 (S.D.N.Y. May 16, 2025).
[8] “Complaint and Demand for Jury Trial,” Cigna Group v. Celgene Corp., No. 25-5237 (S.D.N.Y. June 24, 2025).
[9] “Decision to accept commitments offered by Vifor in relation to the supply of high-dose intravenous iron,” Competition and Markets Authority (May 23, 2025).
[10] “Digital Markets, Competition and Consumers Act 2024,” Legislation.Gov.UK (June 4, 2025).
[11] “Court upholds CMA’s £99m fine on pharma over excessive NHS thyroid drug prices,” Gov.UK (May 8, 2025).
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