More aggressive FTC begins targeting drug mergers and industry middlemen

Led by an aggressive opponent of anti-competitive business practices, the Federal Trade Commission is acting against pharmaceutical companies and industry intermediaries as part of the Biden administration’s push to lower drug prices over the counter. the pharmacy.

On May 16, the FTC filed a lawsuit to block the merger of drugmakers Amgen and Horizon Therapeutics, claiming that the tangled web of deals with the pharmaceutical industry would allow Amgen to leverage the monopoly power of two of the main Horizon drugs that have no rivals.

In its lawsuit, the FTC said that if it clears the $27.8 billion purchase of Amgen, Amgen could pressure companies that manage access to prescription drugs — Pharmacy Benefit Managers, or PBMs. – to increase the two extremely expensive Horizon products in a way that would prevent any competition.

The lawsuit, the first time since 2009 that the FTC has tried to block a merger of pharmaceutical companies, reflects Chairman Lina Khan’s keen interest in antitrust action. In announcing the lawsuit, the agency said that by fighting monopoly powers, it aimed to control prices and improve patients’ access to cheaper products.

The FTC’s action is a “cross-the-bow shot for the pharmaceutical industry,” said Robin Feldman, a professor and pharmaceutical industry expert at the University of California, San Francisco School of Law. . David Balto, a former FTC official and attorney who fought the Bristol-Myers Squibb-Celgene and 2020 AbbVie-Allergan mergers, said the FTC’s action is long overdue.

The Horizon-Amgen merger “would cost consumers higher prices, less choice and innovation,” he said. “The merger would have given Amgen even more tools to exploit consumers and harm competition.”

The FTC also announced the extension of a year-long investigation into PBMs, saying it was looking into two giant drug-buying companies, Ascent Health Services and Zinc Health Services. Critics claim that PBMs set up these companies to hide profits.

When Amgen announced its purchase of Horizon in December – the largest biopharmaceutical transaction in 2022 – it showed particular interest in Horizon’s drugs for thyroid eye disease (Tepezza) and severe gout (Krystexxa), which the company charged up to $350,000 and $650,000, respectively. , for one year of treatment. The complaint said the merger would disadvantage biotech rivals that have similar products in advanced clinical trials.

Amgen may be promoting Horizon drugs through a “cross-market aggregation,” the FTC said. This means forcing PBMs to promote some of Amgen’s less popular drugs – Horizon products, in this case – in exchange for Amgen offering PBMs steep discounts for its blockbusters. Amgen has nine drugs that each made more than $1 billion last year, according to the complaint, the most popular being Enbrel, which treats rheumatoid arthritis and other conditions.

The three largest PBMs negotiate prices and access to 80% of prescription drugs in the United States, giving them enormous bargaining power. Their ability to influence what drugs Americans can get, and at what price, allows PBMs to secure billions in discounts from drugmakers.

“The prospect that Amgen could leverage its portfolio of blockbuster drugs to gain advantages over potential rivals is not hypothetical,” the FTC complaint states. “Amgen deployed this very strategy to obtain favorable terms from payers to protect sales of Amgen’s struggling drugs.”

The lawsuit noted that biotech Regeneron sued Amgen last year, alleging the latter’s reimbursement strategy harmed Regeneron’s ability to sell its competing cholesterol drug, Praluent. Amgen’s Repatha generated $1.3 billion in global revenue in 2022.

It “may be effectively impossible” for smaller rivals to “match the value of bundled discounts that Amgen would be able to offer” because it takes advantage of Horizon drug placement on health plan formularies, the complaint says. .

Trade analysts were skeptical of the success of the FTC action. So far, the commission and the Justice Department have avoided challenging pharmaceutical mergers, a precedent that will be difficult to overcome.

Research on the impact of mergers has shown that they often benefit shareholders by increasing stock prices, but harm innovation in drug development by reducing research projects and personnel.

Waves of consolidation reduced the number of major pharmaceutical companies from 60 to 10 between 1995 and 2015. Most mergers in recent years have involved “big fish buying lots of small fish”, such as biotechnology companies offering drugs promising, Feldman said.

The giant Amgen-Horizon merger is an obvious exception, and therefore a good opportunity for the FTC to demonstrate a “theory of evil” around the pharmaceutical industry’s consolidation maneuvers with PBMs, said Aaron Glick, mergers analyst at Cowen & Co.

But that doesn’t mean the FTC will win.

Amgen may or may not be engaging in anti-competitive practices, but “a separate question is how does this lawsuit fit in with current antitrust laws and precedents?” Glick said. “The way the law is set today, it seems unlikely to hold up in court.”

The FTC’s argument about Amgen’s behavior with Horizon products is hypothetical. The ongoing Regeneron lawsuit against Amgen, along with other successful lawsuits, suggests rules are in place to suppress this type of anti-competitive behavior when it occurs, Glick said.

The judge presiding over the case in the U.S. District Court in Illinois is John Kness, who was nominated by then-President Donald Trump and is a former member of the Federalist Society, whose members have tend to be skeptical of antitrust efforts. The case should be settled by December 12, the deadline for the merger to be completed under the current conditions.

Amgen sought to undermine the government’s case by agreeing not to bundle Horizon products in future negotiations with drug benefit managers. That promise, though difficult to enforce, could get a sympathetic hearing in court, Glick said.

Still, even a loss would allow the FTC to shed light on a problem in the industry and what it sees as a loophole in antitrust laws that it wants Congress to fix, he said.

A day after a lawsuit to stop the merger, the FTC announced it was pushing ahead with an investigation into drug benefit managers it began last June. The agency requested information from Ascent and Zinc, the two so-called rebate aggregators – drug buying organizations created by PBM Express Scripts and CVS Caremark.

In a May 10 hearing, Eli Lilly & Co. CEO Dave Ricks said most of the $8 billion in refund checks his company paid out last year went to data aggregators. reimbursement, rather than to PBMs directly. A “big chunk” of the $8 billion went overseas, he said. Ascent is based in Switzerland, while Emisar Pharma Services, an aggregator created by PBM OptumRx, is headquartered in Ireland. Zinc Health Services is registered in the United States

Critics say aggregators allow PBMs to mask the size and destination of rebates and other fees they charge as intermediaries in the drug business.

PBMs say their efforts are reducing prices over the pharmaceutical counter. Testimony in Congress and at FTC hearings over the past year indicates that, at least in some cases, they are actually increasing them.

This article was reprinted from with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health policy research organization not affiliated with Kaiser Permanente.

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