The US Federal Trade Commission cleared the way for Mylan N.V.’s acquisition of Pfizer Inc.’s Upjohn unit of mature brand and off-patent products, voting 3-2 that divestiture of seven products will resolve anticompetitive harms from the transaction. But in a sharp dissent, Commissioners Rohit Chopra and Rebecca Kelly Slaughter said government investigations and lawsuits against Pfizer and Mylan alleging market allocation and price fixing should have been considered.
The two Democratic commissioners have advocated that the Commission go beyond consideration of product overlaps in assessing the impact of pharma mergers and acquisitions, including drug pricing. They also opposed AbbVie Inc.’s acquisition of Allergan plc and Bristol Myers Squibb Company’s acquisition of Celgene Corporation.
As a minority, their views have not altered the FTC’s traditional approach in merger analysis. But antitrust lawyers, including former FTC attorneys, say the outcome of the election could put them in the majority if Democratic presidential candidate Joseph Biden Jr. prevails, and impact the review of future pharma mergers.
Under the $12bn deal announced in July 2019, Pfizer’s Upjohn division, which includes Pfizer’s authorized generic business, will be spun out and combined with Mylan and the new entity will be called Viatris. The FTC filed a complaint alleging the combination would harm US competition in seven generic drug markets and delay or eliminate a likely entrant in three additional generic drug markets. The proposed consent order, announced 30 October, requires divestment of six Upjohn products and one Mylan product to Prasco Laboratories, LLC.
The Upjohn products are amlodipine besylate/atorvastatin calcium tablets, phenytoin chewable tablets, prazosin HCl capsules, spironolactone HCTZ tablets, gatifloxacin ophthalmic solution, and medroxyprogesterone acetate injectable solution. The Mylan product is eplerenone tablets.
The parties must also obtain approval from the FTC before gaining an interest in or exercising control over any third party’s rights to three other products: levothyroxine sodium tablets, used to treat hypothyroidism and thyroid cancer; the ulcer medication sucralfate tablets; and the smoking cessation treatment varenicline tartrate tablets (Pfizer’s Chantix).
Silence On Price-Fixing
In a dissenting statement, joined by Commissioner Slaughter, Chopra noted that Pfizer and Mylan are defendants in several state attorney general and private plaintiff lawsuits alleging market allocation and price fixing in the generic drug industry and are under criminal investigation by the US Department of Justice. He said the Commission “must assess whether this merger will enhance their ability to conspire and collude.”
“With more generic drugs in the hands of one competitor, it may be easier to form a cartel and punish those who don’t adhere to its terms. Despite this risk, the Commission’s analysis is silent with respect to the price-fixing conduct,” Chopra said.
Chopra also noted that Mylan President Rajiv Malik, who will be president of Viatris, is named as a defendant in one of the state lawsuits and Mylan VP of Sales James Nesta is a named in another case.
“Despite the obvious alarm bells raised by Mr. Malik’s planned role in the merged firm, the Commission’s analysis does not discuss his involvement in the ongoing price fixing and market allocation allegations in the industry or his future plans for the company. In my view, the Commission owes the public a clear explanation about Mr. Malik’s role,” he stated.
State attorneys general have filed three suits against more than a dozen generic drug manufacturers and numerous executives alleging price fixing and market allocation. The DOJ has been conducting a parallel criminal investigation that has resulted in charges against seven companies and four executives. Teva was the most recent company to be charged by the DOJ. (Also see "Teva Gambles Indictment Is Better Than Pleading Guilty To Price-Fixing Claims" - Pink Sheet, 26 Aug, 2020.)
Chopra also expressed concern that executives in the pharmaceutical industry routinely propose anticompetitive mergers without any fear that their transactions will ever be blocked. “In my view, the status quo approach of seeking settlements through divestitures of individual products is myopic and misses some of the fundamental elements of how firms compete in this industry,” Chopra said.
Chopra and Slaughter, the only two Democrats on the Commission, made similar comments in opposing the FTC’s clearance of the AbbVie-Allergan merger (Also see "FTC Narrowly Okays AbbVie/Allergan Merger As Dissenter Slams Divestitures To AstraZeneca, Nestlé" - Pink Sheet, 6 May, 2020.) and BMS’s acquisition of Celgene. (Also see "FTC Vote On BMS-Celgene Acquisition Splits Over Drug Pricing" - Pink Sheet, 18 Nov, 2019.)
FTC Commissioner Christine Wilson issued a brief statement saying the FTC staff “thoroughly investigated all cognizable theories of harm to competition during more than one year of review” of Mylan’s proposed acquisition of Pfizer’s off-patent drug business. She said that prices for pharmaceuticals and biologics deserve the attention of the American public and the federal government and encouraged government entities with the appropriate mandates “to fix the many problems in this sector that lie beyond our jurisdiction."
Will Dissent Have An Impact?
David Balto, former policy director of the FTC’s Bureau of Competition, said the price-fixing allegations should have prevented the merger.
“I think they’ve identified the canary in the coal mine,” Balto said of Chopra and Slaughter. “The fact that these firms are engaging in price-fixing means there should be a more intensive approach to merger analysis that goes beyond the narrow paradigm” the Commission is using.
Andre Barlow, of Doyle, Barlow & Mazard, said that even though it appears that Chopra’s past dissents have not had much impact on the FTC’s review of mergers, the dissents are significant.
“He is urging the Commission to use a reinvigorated and broader examination when evaluating pharmaceutical drug mergers in the future, which expands beyond the identification of overlaps, but includes a much broader analysis of competition,” he stated.
Barlow said there is really no concrete evidence that these narrow divestitures of product overlaps actually restore competition. “The lack of litigation or concrete results from settlement agreements raise serious questions and he is asking them,” Barlow stated.
Michael Carrier, professor at Rutgers Law School, said that as strongly as Chopra and Slaughter feel, they are in the minority and he does not think their dissent will have a significant impact on future pharma mergers. But he said there has not been enough attention on the fact that brand and generic companies are overlapping more and more.
“The generic industry is getting more concentrated, companies are getting bigger and overlapping with brand firms” in product markets, Carrier said, so one may ask if they are acting as intended under the Hatch-Waxman Act.
Possible Commission Shake-Up
There is a chance, however, that the makeup of the Commission could change if Biden is elected president. Stephen Calkins, professor of law at Wayne State University and former FTC general counsel, said that FTC chair Joseph Simons is not required to step down as chair but would do so “because he is a class act and that is what elegant chairs do.” Balto also said that Simons would follow precedent and step down.
That would enable Biden to nominate another commissioner to the helm and Calkins said he could choose Chopra. Calkins said that if Simons, a Republican, is no longer chair it is highly unlikely that he would choose to remain on the commission so that would open up a spot. The rules require that no more than three commissioners may be from one party. The five commissioners were all appointed to seven-year terms in 2018. (Also see "Will FTC Shakeup Impact Pharma?" - Pink Sheet, 12 Feb, 2018.)
The question is, if Chopra or Slaughter were to be named chair and joined by another Democratic Commissioner, “would they pursue more aggressive theories” in review of pharma mergers? Calkins said. “I would think so.”
In the meantime, the Mylan-Upjohn deal is set to go into effect. Mylan and Pfizer said in a joint release that they have obtained all required antitrust clearances for the transaction and it is expected to close on 16 November at which time the combined company will be renamed Viatris Inc. Upon completion, Pfizer stockholders will own 57% of the outstanding shares of Viatris common stock and Mylan shareholders will own 43%.
The European Commission gave final approval to the Mylan and Upjohn combination last month. Australia and New Zealand have also approved the transaction. (Also see "Mylan And Upjohn Combination Takes Key Step To Completion" - Generics Bulletin, 16 Sep, 2020.)
The consent package is to be published in the Federal Register and after a 30-day public comment period, the Commission will decide whether to make it a final order.
The action marks the transformation of Mylan, which was founded in 1961, into a new company and the beginning of a new story. (Also see "The End Is Nigh For Mylan, But How Different Will The New Company Be?" - Scrip, 31 Jul, 2019.)