Yesterday, a coalition of over a dozen consumer groups and unions sent a letter to the Federal Trade Commission (FTC) expressing concerns about the huge AbbVie-Allergan merger. They write that the merger would likely harm competition and consumers and result in higher drug prices. The organizations urge the FTC to conduct a careful investigation of the deal and block it if necessary.
The groups that signed onto the letter are Families USA, Public Citizen, U.S. PIRG Education Fund, Service Employees International (SEIU), American Federation of State, County, & Municipal Employees (AFSCME), UNITE HERE, Consumer Action, American Federation of Teachers (AFT), Alliance for Retired Americans, American Family Voices, Doctors for America, End AIDS Now, Prescription Justice, Social Security Works, the Other 98, Treatment Action Group, and NextGen California.
The $63 billion merger, where the drug company AbbVie would acquire Allergan, is one of the largest recent acquisitions in an already concentrated pharmaceutical industry. It would create the fourth largest drug company with leadership positions in immunology, neuroscience, women's health, eye care, and other areas. Between 1993 and 2015, increasing consolidation in the prescription drug industry resulted in 2,500 deals and substantially higher drug prices. And when drug companies merge, they tend to reduce innovation because they cut back on research and development of new medicines.
In the letter, the organizations write that "both companies have engaged in a wide variety of anticompetitive conduct to stifle competition including restrictive contracting practices and intellectual property abuse." AbbVie's blockbuster biologic Humira is the best selling drug in the world, and the company has 136 patents on the drug and various stages of its development to discourage competition from other drugs. AbbVie used this patent thicket to increase Humira's list price from $16,636 in 2006 to $58,612 in 2017, an increase of over 300%!
The consumer groups and unions point out that "neither inflation nor higher manufacturing costs explain these price increases. Given AbbVie's history of price increases, it is easy to predict what could be expected if AbbVie acquires control of Allergan's drug portfolio."
Allergan has also engaged in anticompetitive behavior by erecting "rebate walls" to block competition against its drugs Botox and Restasis. A rebate wall is when a drug manufacturer uses its market-dominant position to secure preferred formulary access for its products by offering lucrative incentives to pharmacy benefit managers and health insurers in the form of volume-based rebates. Allergan has been sued for bundling rebates for Restasis together with rebates for other drugs in its portfolio, to keep rivals from coming to market.
If the FTC allows AbbVie to acquire Allergan, AbbVie will be able to use its increased market power to erect more rebate walls.
Moreover, the two companies have competing products. "Press articles note that both AbbVie and Allergan have two investigative biologic drugs working their way through the U.S. Food and Drug Administration ("FDA") approval process that are indicated to treat Crohn's disease and ulcerative colitis...Press articles also suggest that AbbVie and Allergan currently compete in the manufacture and sale of pancreatic enzyme therapies for exocrine pancreatic insufficiency and drugs to treat uterine fibroids, among others."
The FTC should carefully investigate the AbbVie and Allergan merger, and take effective enforcement action to make sure that competition is protected and consumers have access to effective and affordable brand drugs, as well as biosimilars and generic drugs. It should not hesitate to block this merger.