By Mark Pfeifle and Bob Jensen

 

While Senate Majority Leader Charles Schumer was steering bipartisan legislation to stimulate major investments in science through the Senate, his former chief counsel, acting Federal Trade Commission chairwoman, Rebecca Kelly Slaughter, was leading the FTC in an unprecedented effort to block a merger of two U.S. companies that hope to revolutionize cancer detection and treatment. If successful, the losers won’t just be the countless millions of patients whose cancers may be detected too late: national security is at stake as well.  

 

Today, the private sector supports military advancements in artificial intelligence, cyber, biometrics and other sciences, and to provide the expertise to quickly and efficiently bring cutting-edge technologies to our nation’s warfighters. But that often relies on companies whose focus is on discovery successfully merging with companies whose specialty is bringing those discoveries to market.  

 

“The Department of Defense (DOD) has gone from being a producer to a consumer of innovation,” wrote James Andrew Lewis, of the Center for Strategic and International Studies. “The center of gravity for innovation and tech investment has moved away from government.” 

 

Grail is one of a handful of companies developing cancer screening tests that use DNA sequencing of blood or other bodily fluids to detect cancer early. In cancer treatment, early detection is critical, and Grail’s technology is a potential game-changer, offering accurate, noninvasive screenings that can detect cancer even before symptoms appear. It’s why Illumina, a San Diego company that makes genetic sequencing platforms, started Grail five years ago and spun it off on its own to raise enough venture capital to conduct large scale clinical trials. 

 

Grail’s multi-cancer early detection (MCED) blood tests can now reliably detect 50 cancers with a less than 1 percent false positive rate. Of these 50 types of cancer, 45 do not have recommended screening tests — which is why two-thirds of cancers in the United States go unscreened.

 

Grail was contemplating an IPO last year when Illumina offered to buy the company back, arguing that its commercial expertise could bring Grail’s MCED technology to market faster. The FTC intervened and said Illumina would bring an unfair advantage to Grail, and sued to block the merger.

 

The FTC’s argument is absurd on multiple levels. Most importantly, Illumina is not proposing to acquire a competitor. Rather, it provides the equipment to process Grail’s tests. The FTC is not acting to prevent direct competition, but instead is acting against a vertical merger of two firms at different stages in the same supply chain. This merger is substantively no different than the Raytheon – United Technologies merger that the FTC approved and the companies closed on in 2020. 

 

Vertical mergers such as Illumina-Grail are commonplace in the life sciences industry. Forcing smaller R&D-focused companies like Grail to undertake the risks and unknowns of commercialization will likely cause them to fail, inhibiting future discovery, reducing the development of healthcare technologies, and increasing unnecessary risks to our servicemembers.

 

Facing almost certain defeat in the courts, the FTC has now dropped its case against the merger, allowing the European Commission’s Directorate-General to review it — but the withdrawal is without prejudice, meaning the FTC can re-file the lawsuit in the event the EU fails to act. It is also odd that a U.S. agency would cede authority to an international body, unless they are intentionally delaying to defeat the deal.  

 

The FTC risks setting a dangerous precedent by blocking a vertical merger that will upend America’s biotech industry and dampen innovation for our U.S. military, which increasingly relies on private sector technical innovations to maintain our advantage over potential adversaries. As Thomas Hawley, former deputy undersecretary of the Army, argued, defense mergers are important for national security. 

 

Since our military relies heavily on private sector innovation, the ability for companies to merge complementary capabilities is critical to our security. In this case, the FTC should approve the Illumina-Grail merger, not only for the health of our nation, but also for the health of our warfighters and our national security. 

 


Mark Pfeiflewas a Deputy National Security Advisor to President George W. Bush. Bob Jensen was Principal Deputy Assistant Secretary, Department of Homeland Security, during the administration of President Barack Obama.