[Ip-health] STAT News: Pharma mergers face fresh scrutiny by the FTC and a new international antitrust working group

Ed Silverman pharmalot at gmail.com
Wed Mar 17 01:36:14 PDT 2021


 Pharma mergers face fresh scrutiny by the FTC and a new international
working group

By Ed Silverman
STAT News/Pharmalot
March 16, 2021

In response to a spate of pharmaceutical mergers, several antitrust
regulators and enforcement agencies from the U.S. and Europe are forming a
working group to better understand the impact these deals have on
prescription drug pricing and competition.

The goal is to update the approach taken to analyzing potential economic
harms that a merger may cause; the extent to which a merger may thwart R&D
innovation; evidence needed to challenge a merger; and how should other
conduct in which companies have engaged – such as instances of pricing
fixing – be considered when reviewing a deal.

“Given the high volume of pharmaceutical mergers in recent years, amid
skyrocketing drug prices and ongoing concerns about anticompetitive conduct
in the industry, it is imperative that we rethink our approach toward
pharmaceutical merger review,” said Rebecca Kelly Slaughter, the acting
chair of the U.S. Federal Trade Commission, in a statement.

“Working hand in hand with international and domestic enforcement partners,
we intend to take an aggressive approach to tackling anticompetitive
pharmaceutical mergers.”

The move suggests the Biden administration is poised to take a tougher
stand on some pharmaceutical industry practices, given the potential for
anti-competitive behavior to influence prescription drug prices. It also
reflects interest among Democrats for a stronger push toward antitrust
enforcement.

The working group also includes the Canadian Competition Bureau, the
European Commission Directorate General for Competition, the U.K.’s
Competition and Markets Authority, the U.S. Department of Justice Antitrust
Division, and three state Attorneys General.

We asked the Pharmaceutical Research & Manufacturers of America, the
industry trade group in the U.S., as well as the European Federation of
Pharmaceutical Industries and Associations for comment and will update you
accordingly.

The number and value of mergers and acquisitions has been growing in recent
years. In 2020, there were 1,643 biotech and pharmaceutical deals globally
that were worth $293 billion, according to Dealogic. Of those, 617 deals
worth nearly $208 billion occurred in the U.S. That was up from 1,118 deals
in 2016 that were valued at $130 billion globally, including nearly 387
U.S. deals worth almost $69 billion.

The move comes as anti-trust regulators on both sides of the pond have
stepped up scrutiny of pharmaceutical mergers, as well as other practices
that may harm consumers and competition. High on the list are so-called
pay-to-delay agreements between brand-name and generic drug makers seeking
to settle patent litigation, which can forestall availability of lower-cost
generic medicines.

Mergers, however, have proven controversial at the FTC.

Although large mergers among drug makers are not a regular occurrence, the
FTC has been criticized for taking a narrow approach to blessing these
deals. Generally, the agency has examined therapeutic categories where two
drug makers may overlap — whether through existing medicines or those being
developed — and require divestitures.

As noted previously, however, critics have maintained the FTC has failed to
examine whether this type of analysis has effectively helped to maintain a
sufficient amount of competition. This complaint emerged last year when the
agency required AbbVie (ABBV
<https://www.google.com/search?tbm=fin&ei=L9UFYPrWL9Wt5NoP0dma4Ao&q=abbv+stock&oq=abbv+stock&gs_l=finance-immersive.3...13462.14580.0.14744.5.5.0.0.0.0.82.370.5.5.0....0...1c.1.64.finance-immersive..0.0.0....0.97ofDLRfrIA>)
and Allergan, which it bought for $63 billion, to sell three medicines as a
condition
<https://www.statnews.com/pharmalot/2020/05/06/abbvie-allergan-ftc-merger-antitrust-dissent/>
for
approving the deal.

In a 3-to-2 vote, the FTC determined the “divestitures fully remedy any
potential loss of competition from the proposed transaction.” But critics
argued the decision was shortsighted and noted that two of the drugs, which
are used to treat a condition that results in the inability to digest food
properly, were sold to Nestle, but AbbVie and Allergan controlled 95% of
the market for medicines of that type.

The rationale prompted two FTC commissioners to issue scornful dissents
<https://www.ftc.gov/system/files/documents/public_statements/1574577/191_0169_dissenting_statement_of_commissioner_rebecca_kelly_slaughter_in_the_matter_of_abbvie_and_0.pdf>
and
chastise the agency for an unwillingness to challenge mergers in court.

“I think this is recognition that past deals have been controversial, such
as the AbbVie merger, and especially the question of the FTC treats going
anti-competitive conduct,” said David Balto, a former assistant director of
policy and evaluation at the FTC who, more recently, has represented a
coalition of consumer groups and unions that have objected to
pharmaceutical mergers.

“This is something where the FTC takes a different approach than other
countries, because foreign authorities are more willing to look at ongoing
antitrust conduct. So this would add pressure to the agency to look at such
things as pay-to-delay and rebate walls.”

The term refers to contracting practices between drug makers and pharmacy
benefits managers over placement of medicines on formularies, or coverage
lists used by health plans. By offering a higher rebate for a medicine, a
drug maker can wall off rivals from gaining favorable placement.

Earlier this month, opened a formal investigation into whether Teva
Pharmaceutical (TEVA
<https://www.google.com/search?rlz=1C1GCEA_enUS854US854&ei=hVRCYJ2uDrmj5NoPjO-RuAM&q=teva+stock&oq=teva+stock&gs_lcp=Cgdnd3Mtd2l6EAMyCggAELEDEIMBEEMyCwgAELEDEIMBEJECMgQIABBDMggIABCxAxCDATIGCAAQBxAeMgIIADICCAAyAggAMgIIADICCABQzZs_WM2eP2CVoD9oAHACeACAAZoBiAHAA5IBAzQuMZgBAKABAaoBB2d3cy13aXrAAQE&sclient=gws-wiz&ved=0ahUKEwjdhLjxwZnvAhW5EVkFHYx3BDcQ4dUDCA0&uact=5>)
illegally prevented rival companies from introducing versions of a
top-selling medicine. This marked the first time the EC has opened a formal
investigation into potential antitrust abuses stemming from patent
maneuvers as well as disparaging competing products.

Ed Silverman covers the pharmaceutical industry.
ed.silverman at statnews.com
@pharmalot


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