Ab­b­Vie-Al­ler­gan com­plete, but crit­ics con­tin­ue to raise an­ti-com­pet­i­tive con­cerns

The Ab­b­vie-Al­ler­gan mega-merg­er may now be com­plete, but its crit­ics haven’t had their last say.

In a 7-page let­ter to the Fed­er­al Trade Com­mis­sion, Cal­i­for­nia At­tor­ney Gen­er­al Xavier Be­cer­ra called in­to ques­tion the reme­dies the fed­er­al agency im­posed to solve the an­ti-trust con­cerns in­trin­sic in the $63 bil­lion deal.

Xavier Be­cer­ra

He said the agency did not fol­low its own “best prac­tices” when it comes to the merg­er. Yet even these prac­tices — now com­mon­place in some form or an­oth­er — have con­sis­tent­ly failed to cur­tail an­ti-com­pet­i­tive and price-rais­ing po­ten­tial, Be­cer­ra ar­gued, and should be stud­ied thor­ough­ly in an ef­fort to come up with new fix­es.

“It is wide­ly rec­og­nized that phar­ma­ceu­ti­cal merg­ers that bur­den the pub­lic in the form of high­er prices, few­er drug choic­es, drug short­ages, or oth­er an­ti­com­pet­i­tive ef­fects, must not be al­lowed,” he wrote. “This rais­es the ques­tion of whether, and to what ex­tent, merg­ers that are ap­proved sub­ject to di­vesti­tures re­store the lost com­pe­ti­tion from those merg­ers.”

Di­vesti­tures, in which one com­pa­ny sells off as­sets that would com­pete with oth­er as­sets in the merged com­pa­ny, have be­come the com­mon rem­e­dy for mo­nop­oly con­cerns that have emerged out of an in­creas­ing­ly con­sol­i­dat­ing phar­ma­ceu­ti­cal in­dus­try. Af­ter Bris­tol My­ers Squibb bought Cel­gene, for in­stance, the FTC con­di­tioned ap­proval of the deal on Bris­tol My­ers di­vest­ing Ote­zla, Cel­gene’s an­ti-in­flam­ma­to­ry drug, be­cause Bris­tol My­ers had their own an­ti-in­flam­ma­to­ry drug in the works, al­beit one that used a very dif­fer­ent mech­a­nism. Am­gen bought it for $13.4 bil­lion.

As the FTC re­viewed the Al­ler­gan-Ab­b­Vie deal, though, con­sumer ad­vo­cates ques­tioned both the gen­er­al wis­dom of di­vesti­tures in phar­ma merg­ers and specif­i­cal­ly how they were be­ing ap­plied to this deal. Those were most no­tably put in a sting­ing dis­sent from the FTC rul­ing clear­ing the merg­er, in which com­mis­sion­er Ro­hit Chopra called the pol­i­cy to have com­pa­nies di­vest over­lap­ping drugs “nar­row, flawed, and in­ef­fec­tive.” “It miss­es the big pic­ture,” he wrote, “al­low­ing phar­ma­ceu­ti­cal com­pa­nies to fur­ther ex­ploit their dom­i­nance, block new en­trants, and harm pa­tients in need of life-sav­ing drugs.”

To con­sum­mate the deal, the FTC made Al­ler­gan sell off an ex­per­i­men­tal an­ti-in­flam­ma­to­ry com­pound called brazikum­ab that might com­pete with Ab­b­Vie’s ap­proved Skyrizi. This, Be­cer­ra said, was against FTC guide­lines that call for com­pa­nies to sell off on-mar­ket prod­ucts be­cause ex­per­i­men­tal drugs have a “high rate of fail­ure.” Prod­ucts are al­so sup­posed to be sold to an ex­pe­ri­enced com­pa­ny ready to com­pete. The FTC, though, al­lowed Ab­b­Vie to di­vest the pan­cre­at­ic en­zyme Zen­Pep to Nestlé, “mak­er of choco­lates, bot­tled wa­ter and ba­by food.”

More broad­ly, Be­cer­ra said, there is lit­tle ev­i­dence that di­vesti­tures have been a suc­cess­ful tac­tic. He cit­ed FTC stud­ies showed di­vesti­tures had a 35% fail­ure rate, even when suc­cess is de­fined by the “ex­treme­ly broad and gen­er­ous de­f­i­n­i­tion” of one post-merg­er sale or, for pipeline drugs, sim­ply that the prod­uct was trans­ferred. He al­so cit­ed stud­ies sug­gest­ing the di­vesti­tures don’t pre­vent price in­creas­es.

The at­tor­ney gen­er­al called for a study that would an­a­lyze how well-di­vest­ed on-mar­ket drugs were sold and if pipeline drugs were brought to mar­ket; mea­sures that could be tak­en to guard against the “op­por­tunis­tic se­lec­tion” of di­vesti­ture buy­ers that are less like­ly to ef­fec­tive­ly de­vel­op or mar­ket drugs, such as — in Be­cer­ra’s view — Nestlé; and the role of phar­ma­cy ben­e­fit man­agers who, by cre­at­ing tiered for­mu­las, can block even the best di­vesti­tures from com­pet­ing.

Ul­ti­mate­ly, he of­fered, the FTC might have to do for phar­ma what they of­ten do for oth­er in­dus­tries: im­pose lim­its on what com­pa­nies can do af­ter the merg­er to en­sure the po­ten­tial suc­cess of the di­vest­ed and now ri­val prod­uct.

“Such a rem­e­dy could be es­sen­tial for the suc­cess of drug di­vesti­tures like Brazikum­ab, which is a pipeline drug that, once and if it gets to mar­ket, would need to com­pete against Ab­b­Vie’s in­cum­bent drug for PBM for­mu­la­ry ac­cess,” he wrote.

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